Annuity charges have risen by 35% over the previous 12 months, to hit their highest level in a decade, in response to a brand new report.
A 65-year-old retirement saver with a £100,000 pension can now get an annuity revenue of £6,637 per 12 months (single life stage annuity with five-year assure).
This in comparison with final September when the identical retirement saver would solely obtain round £4,900 per 12 months, in response to new information from Hargreaves Lansdown.
The final time annuity charges have been this excessive was March 2010, when a 65-year-old male might get round £6,678.
Annuity charges had been in decline because the begin of the worldwide monetary disaster in 2008, and within the UK hit an all-time low within the aftermath of the Brexit vote in 2016.
Charges are anticipated to rise additional nonetheless ought to the Financial institution of England announce one other rise within the base price at the moment.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, mentioned: “Annuities as soon as dominated the roost in retirement revenue however the low charges on provide meant they confronted criticism that they provided poor worth for cash. The introduction of Freedom and Alternative, which gave folks rather more flexibility over how they took their pension, noticed their use decline vastly.
“These rising charges might encourage individuals who wouldn’t have considered buying an annuity this time final 12 months to provide them critical consideration.”
A separate report from Commonplace Life earlier this week mentioned that annuity charges have improved by 25% because the begin of this calendar 12 months.
Canada Life has additionally highlighted improved annuity charges. The retirement supplier’s benchmark reference annuity of £100,000 at age 65 will now pay round £6,353 revenue a 12 months, in comparison with £4,542 for a similar annuity bought at the beginning of 2022.
Nick Flynn, retirement revenue director at Canada Life, mentioned the rise was the 16th time this 12 months annuity charges have improved.
He mentioned: “Annuity charges have continued to bounce again following adjustments to base price and the enhancements in yields on gilts, with charges up round 40% this 12 months. This sustained progress in potential revenue warrants giving annuities a re-assessment, particularly for anybody involved about revenue safety in retirement.
“Annuities can play a key function in retirement plans and it’ll all the time play to buy round for not solely the perfect price however the precise form annuity. An adviser or dealer will assist select the precise annuity for the purchasers’ particular person circumstances.”