The annuity market is booming.
That’s according to recent data from the FCA showing the market grew by 7.8% in 2024/25. This is off the back of further growth in the previous year with earlier data from the Association of British Insurers also pointing to a vibrant market.
It’s a turnaround in fortunes for a market that has been in the doldrums since the introduction of Freedom and Choice back in 2015.
All of this raises the question, is now a good time to buy an annuity?
This article isn’t personal advice. If you’re not sure if an action is right for you, ask for advice.
Remember, you can't usually access money in a pension until you're 55 (rising to 57 in 2028).
What’s happening in the annuity market?
Following a series of rate cuts since 2008, annuities became seen as offering poor value for money with incomes declining steadily as interest rates fell.
However, after a sustained period of extremely low rates, we’ve since seen them recover and annuity incomes have soared. This is helped further by another rate freeze from the Bank of England in September.
The latest data from HL’s annuity search engine shows that a 65-year-old with a £100,000 pension can get around £7,800 per year from a single life level annuity.
With the market offering some of the best incomes seen in years it has led to people who may not have previously considered an annuity as part of their retirement planning to take a closer look.
After a period of rapid increases, annuity incomes have settled so we could see those who have previously held back in the hope of further increases deciding that now is the right time to take the plunge.
What to consider before buying an annuity
It’s vital to do your research before opting for an annuity.
Once bought an annuity cannot be unwound so if you make a mistake, you will be stuck with the consequences.
Make sure you get quotes from across the market before you decide, and an annuity comparison service can help.
Different providers offer different rates so it’s important you see what’s out there – don’t just accept the first quote you’re offered.
As well as income levels you also need to make sure you chose the right type of annuity for your needs.
If you have health conditions, then an enhanced annuity could get you more income. While if you’re married then you might want to consider getting a joint life product to make sure your spouse or civil partner is taken care of if you die before them.
Similarly, you might want to consider whether an inflation linked product that rises every year is a good option for you, versus a level annuity that offers a higher starting income but does not rise beyond that.
It's also important to understand that you’re under no obligation to annuitise all of your pension in one go. You can instead annuitise in slices throughout your retirement securing guaranteed income as your needs change.
This gives you the flexibility of keeping some of your pension invested where it can grow. You can also annuitise at higher incomes as you age. As you get older there’s the potential for you to qualify for an enhanced annuity which could give you a further boost in your income with higher rates.
The government’s free Pension Wise service can help if you’re over 50 and need guidance about your retirement options. You should also get personalised financial advice if you need it.