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Some annuity rates hit a two-year high – is now the right time to buy a secure retirement income?

If you want a guaranteed income in retirement, you might consider an annuity. Potential buyers may have been put off by declining rates and the “lower” income on offer. But this year could signal a change. Here are our tips on how to get the best deal.

Important notes

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.

An annuity is a type of retirement income product that you can buy with some, or all, of your pension. It pays a regular taxable income guaranteed for life, or a set period.

Only a handful of insurance companies offer annuities. How much you get will depend on the annuity rate offered by the provider at the time. Factors like interest rates and your health and lifestyle details will also impact how much income you could get.

Despite the attraction of a secure income, falling annuity rates have made buying one less popular in recent years. But with standard rates reaching their highest levels since 2019 for some age groups, annuities could see a positive change in demand.

This article isn’t personal advice. Once you buy an annuity, you can’t usually cancel it, so make sure you consider your options carefully. If you're not sure what's right for you, get guidance from Pension Wise or ask for financial advice.

How much more annuity income could you get?

A 65-year-old with a pension worth £100,000, could receive an extra £99 a year compared to the same time two years ago. For a 70-year-old they could get an extra £102 a year, and a 75-year-old could get £157 more. Although these rises might seem small, over the course of a retirement, this extra cash can mount up.

These quotes were generated using our online annuity quote tool, which compares the rates available from the UK's leading annuity providers. All quotes are based on a married individual with an average height, weight and postcode and paid monthly in advance, with no death benefits, a level income. Quotes don’t include any other health and lifestyle factors.

How to secure the best annuity rate

When is the right time to buy an annuity?

Although rates have risen, the right time to buy an annuity really depends on your circumstances. A good time to consider buying an annuity might be when you give up work completely – remember you usually only access a pension like this from 55 (57 from 2028). You’ll no longer have a steady income stream from earnings to cover your essential bills. An annuity can help plug this gap.

Annuity purchases don’t have to be an all or nothing approach. You could think about buying several smaller annuities using a bit of your pension at a time. This lets you gradually de-risk your pension. It reduces the risk of locking all your money into an annuity at one point in time, or when rates are low, and allows you to shape your retirement based on your changing circumstances.

It’s a good idea to regularly get quotes after you finish work. It can help you to keep an eye on ever-changing rates to secure the best deal. There’s no obligation to buy an annuity after you request a quote, but the rate on the quote will only be guaranteed for a limited time.

Once you buy an annuity, your income is fixed for the rest of your life. It will only change if you build in certain annuity features so make sure you consider your options carefully.

How to get a quote

Remember what you do with your pension is an important decision that you might not be able to change. You should check you're making the right decision for your circumstances and that you understand all your options and their risks. If you’re 50 or over, the government's free and impartial Pension Wise service can help you, and we can offer personal advice at any age, if you’d like it.

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Important notes

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.

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