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Annuity rates on the rise again – time to buy?

Annuities are back on the rise again and are still delivering better value than we’ve seen in years. So, is now the time to buy an annuity?

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Annuities have been a rollercoaster the last few years, with soaring interest rates pushing incomes upwards.

After the 2022 mini-Budget, a 65-year-old with a £100,000 pension could get themselves up to £7,586 a year – the highest income since the 2008 global financial crisis.

Having spent years on the sidelines, annuities were back with a bang recording £5.2bn in sales in 2023.

But the Bank of England (BoE) pressing pause on interest rate rises have seen incomes slowly falling back, sparking speculation about their future direction. The good news is that in recent months incomes have been quietly on the rise again.

Recent data from our annuity search engine is showing the same 65-year-old could now get up to £7,430 per year from their annuity.

This is just a shade away from its post mini-Budget highs and the highest we’ve seen since last October.

This article isn't personal advice. If you're not sure what to do with your pension, you should seek guidance from Pension Wise, the government’s free impartial service to help you understand your retirement options. If you need more help, think about financial advice.

Why are annuity incomes rising again?

The market's realised it’s overestimated how soon and how fast rates would be falling, so it’s quietly planning for them to be slightly higher for longer.

This shows that annuities are still delivering the best value we’ve seen in years. We can expect to see interest in them keep growing from people looking at securing a guaranteed retirement income.

However, even if the BoE does start cutting rates, we’re still far from the rock-bottom interest rates when annuity incomes were at their lowest.

Why choose an annuity?

Annuities should always be part of the conversation if you’re looking for a guaranteed income in retirement.

You don’t have to annuitise your entire pension in one go though.

You can annuitise your pension in stages, letting you lock in guaranteed income and giving you the potential to benefit from higher rates as you age.

The concern a lot of people have is that annuities can’t usually be undone. You could potentially miss out on future market upswings or even a better rate if you develop a health condition later in life.

Inflation protection is also something to think about. You can get inflation-linked annuities, but the starting income is usually a lot lower than a level annuity and it can take years to make up the difference.

Inflation might be lower now, but it wasn’t long ago that it was reaching eye-watering heights. So, it’s a decision that needs to be weighed carefully considering all of your assets.

How to get the best annuity rate


Shop around for the right annuity

Don’t just accept the first annuity quote you find.

Rates vary between providers and your current pension provider might not offer you the most for your money.

It’s always worth shopping around to get the best deal.


Make sure you confirm your health and lifestyle details

Unlike some insurance products, if you disclose your health and lifestyle details when you get an annuity quote, you’ll normally get a better deal.

Even confirming minor details like your height and weight could mean you get a higher annuity income. This type of annuity is known as an enhanced annuity.

Remember, the income you could get depends on your circumstances. Quotes are only guaranteed for a limited time and rates change frequently and could go up or down in the future. It's also important to think carefully about your options because you can't usually change or cancel an annuity once it's set up.

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Written by
Helen Morrissey
Head of Retirement Analysis

Helen raises awareness of key retirement issues to help people build their resilience as they move towards their later life.

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Article history
Published: 14th March 2024