Annuity rates could rise by 14 per cent if the Bank of England raises its base rate to 1.5 per cent this year, according to Canada Life.
Annuity rates have already risen in response to the December increase in the base rate, with rates rising on average 5.4 per cent in January, with further increases likely following the 0.25 per cent increase in the base rate last week.
If annuity rates rise by 14 per cent, a £100,000 annuity would receive an extra £700 per year.
Canada Life annuity sales director Nick Flynn says: “We have already responded to the base rate rise by increasing our annuity rates twice in January. We are carefully monitoring yields and will move when we are able to pass on any improvement to our customers. Although it’s difficult to predict how annuity rates will change in the future, if interest rates continue to increase as predicted then it’s great news for those looking to purchase an annuity. Annuity rates could improve by 14 per cent if interest rates hit 1.5 per cent this year.
“We’ve seen more quote activity in January than in previous years, and this could be down to pent up demand as people have postponed retirement due to the pandemic, working from home and the furlough scheme. People like the security of lifetime income, especially in times of uncertainty.
“It always pays to seek advice and shop around, as you will not only secure the best annuity rate, but also the right shape annuity for your personal circumstances.”