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Interest rate rise: what will it do to annuity rates?

3 August 2018

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

On 2 August the Bank of England raised interest rates to 0.75%.

While this modest increase won’t have you laughing all the way to the bank, it could boost your retirement income.

So what will happen to annuity rates?

An annuity remains one of the only ways to turn your pension into a guaranteed income for life.

Annuity providers buy government bonds to generate returns. Low interest rates push these returns down. So a rise in interest rates should push annuity rates up.

Interest rates reached a record low in 2016 at just 0.25%. And annuity rates tumbled to rock bottom soon after.

But since then rates have risen steadily, with some now up 22% on where they were two years ago.

If you haven't looked at what income your pension could give you for a while, now's a good time to check.

Find out how much annuity income you could receive

15 September 2016 Today Difference
Annual annuity income from a £100,000 pension £4,495 £5,475 +22%

These quotes were run on our annuity quote tool. Both are for a 65 year old. The annuity will pay for the client's life only (single life), with a 5 year guarantee, the income will be paid monthly and remain the same each year (level). The income you could receive will depend on your circumstances. Quotes are only guaranteed for a limited time and rates change frequently. So they could go up or down in the future.

Find out how much annuity income you could receive

How can you get the highest income?

Interest rates aren't the only thing affecting the income you can receive.

Providers change their rates all the time. And the highest provider is constantly changing. So shopping around is vital. You can get quotes from all the providers in the UK using our annuity quote tool.

It's worth checking what your current provider will offer too. Just in case there are any valuable benefits attached to your plan. But usually the income they offer will be much lower than you can get on the open market.

This tip could mean £1,000s in more income

Annuity providers decide your income based on how long they think you will live. The longer you are expected to live, the longer they'll need to pay you.

So anything that might mean your life expectancy is reduced will mean you get more income. You can confirm health information when you request a quote to see how much more income is available.

Our clients increased their annual annuity quotes by £1,205.79* on average last year due to medical or lifestyle conditions.

You don't need to be unwell to qualify, even confirming your height, weight and alcohol intake could mean you get more income.

The key is to confirm as much as possible. We make this easy on our online quote tool. You can add this information and get live, guaranteed quotes straight away.

Find out how much annuity income you could receive

What help is available?

What you do with your pension is an important decision. So we strongly recommend you understand your options and check your chosen option is right for you. Take advice or guidance if you are unsure.

The government provides a free and impartial service to help you understand your retirement options - more on Pension Wise.

This article isn't personal advice. We offer a range of information and support to help you plan your own finances. We also have an award-winning team of financial advisers who can help you achieve your goals. Our flexible approach means you only pay for the advice you need.

If you'd like to get annuity quotes over the phone and discuss your options with one of our retirement experts you can contact our retirement helpdesk on 0117 980 9940 (Monday-Thursday 8am-7pm, Friday 8am-6pm and Saturday 9:30am-12:30pm). They'll be happy to help.

* Average increase quoted in 2017, based on the top and bottom rate for 4,445 clients. Actual increases will depend on your pension value and personal circumstances.

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Investment notes
No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

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