Annuity rates surge to 16-year high

Annuity incomes have surged to a 16-year high as the market booms, according to the latest data from Hargreaves Lansdown’s annuity search engine. It shows that a 65-year-old with a £100,000 pension can get up to £7,639 per year from a single life level annuity with a five-year guarantee. That is the highest rate paid out since December 2008, when men could get £7,646 a year. Annuity rates were hit in the aftermath of the financial crisis as consistently low interest rates pulled down the rates paid on the retirement income products. Rates hit a low after the Brexit vote. Rising interest rates in more recent years saw annuity incomes climb, hitting £7,586 after the mini-Budget in 2022. After being in the doldrums for years, the better rates offered has led to a surge in interest, with annuity sales hitting £7bn on 2024 according to the Association of British Insurers. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Annuity incomes have surged again, delivering their highest incomes in more than 16 years. “It’s a reversal of fortune for a market that many thought had been all but killed off by a combination of rock-bottom interest rates and the Pension Freedom and pension choice reforms.” She pointed out that the ABI recently hailed 2024 as a bumper year for annuities and she predicted the momentum will continue into 2025 as people mull the best option for securing a guaranteed income in retirement. Ms Morrissey warned potential buyers that they need to consider their options carefully. “Once bought, an annuity cannot be unwound, so anyone acting in haste may find they are repenting at leisure if they don’t get the right type of product for their needs.” She warned about the danger of buying a level annuity which could be, “nibbled away by inflation over time.” The latest data from the Hargreaves annuity search engine shows a 65-year-old can get up to £5,418 per year from an annuity that grows by 3% per year. That compares to the £7,639 paid on a level annuity where income remains the same.

Annuity rates surge to 16-year high

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