Annuity rates have continued to rise with the best rates on the market topping 7.7 per cent — the highest level for a decade.
Standard LIfe’s annuity rates tracker shows that annuity rates are 10 per cent higher than a year ago – despite cuts to interest rates cuts over the past 12 months.
This tracker shows that the average annuity rate for a healthy 65-year old now stands at 7.72 per cent.
Standard Life says this is a significant increase over the past five years. In July 2020 comparable annuity rates stood at just 4.71 per cent. This represents a 64 per cent increase over this period. In monetary terms this means a a 65-year old with a £100,000 pot would be able to secure an income of £7,720 a year for life, compared to just £4,710 five years ago.
Standard Life says that today’s annuity rates mean that with an average life expectancy a man aged 65 would receive a total income £155,180 from his £100,000 pension pot. For a woman this would be £172,940. This is significantly higher than last year, when a 65-year old man could expect a total income of £140,800 over their retirement, or £156,210 for a woman.
Standard Life head of annuities Pete Cowell says: “Our latest Annuity Rates Tracker shows annuity rates surged to their highest levels in years, offering retirees one of the strongest opportunities yet for securing a guaranteed income in retirement.
“While the recent upward trend has been steady, it feels unlikely annuity rates will fall back to historic lows. Interest in annuities is likely to remain strong, particularly given the anticipated changes to IHT in 2027, which may prompt more people to consider annuities as part of their retirement planning.”
He says that that despite recent cuts to the base rate this uplift in annuity has been supported by expectations that interest rates will remain higher for longer, which has affected the pricing of longer-term government gilts.
