Annuity rates for 65-year-olds have increased by almost 8 per cent over the year, adding £12,960 to the total lifetime income of a woman and £11,020 for a man, according to the Standard Life annuity rates tracker.
As a result, a 65-year-old purchasing an annuity today with a £100,000 pension pot would receive an annual income of £7,360 which is £550 more than in January 2024.
According to the tracker, which monitors annuity rates for retirees at ages 60, 65, and 70, an annuity purchased in January 2025 by a 65-year-old man at a 7.36 per cent rate would yield a total lifetime income of £147,940, while a woman would receive £164,860. At 70 years old, a man could get £131,350 and a woman £147,770, assuming an increased rate of 8.21 per cent.
Additionally, a 60-year-old with a 6.65 per cent rate would get £6,650 a year on a £100,000 pension, while a 70-year-old with an 8.21 per cent rate would receive £8,210 which is a difference of £1,560 annually.
Fixed-term annuities provide a guaranteed income for a set period, offering flexibility for those transitioning into full retirement or supplementing other income sources, such as the state pension.
The rates were 9.18 per cent for 15 years, 12.33 per cent for 10 years, and 21.91 per cent for a 5-year period as of January 2025. £100,000 invested in a fixed-term annuity by a 65-year-old may yield £109,571 over five years, £123,346 over ten years, or £137,749 over fifteen years. These figures represent total income received over the term and do not include any remaining capital or maturity value at the end of the period.
Standard Life head of annuities Pete Cowell says: “Our latest Annuity Rates Tracker shows that annuity rates have continued to improve over the last twelve months and continue to offer retirees even stronger total incomes.
“Almost all (98 per cent) people consider income security as an important factor when deciding what to do with their pension pot, and a similar amount (95 per cent) prioritises certainty of income so it’s easy to understand why annuities are an increasingly popular choice. Providing peace of mind through a regular guaranteed income, the growing appeal of annuities is clear in the latest sales figures published by the Association of British Insurers (ABI) – increasing by 34 per cent in a year.
“Looking ahead, we expect annuity rates, as well as the demand for these types of products, to remain strong, especially with pensions being brought into scope for inheritance tax from 2027. Wealthier savers may be encouraged to access more of their pensions, with annuities becoming an increasingly attractive way of doing so.
“It’s also encouraging to see growing industry and adviser recognition on the flexible ways a guaranteed income can be incorporated into a broader decumulation strategy, using annuity products and options to create more tailored retirement journeys that meet specific needs in retirement.”
