Annuity rates have hit a six-month high, with an average 65-year-old in possession of a £100,000 pension pot able to receive up to £7,017 a year for a single life five-year guarantee deal, and a 70-year-old with the same amount able to get £7,838 per year in some cases.

Hargreaves Lansdown said that a 65-year-old smoker opting for a no-guarantee single life annuity could get £7,619 a year, while a smoker aged 75 could get an annual income of £9,180.

The pension provider also suggested that current rates, which are at their highest level since December last year, could continue to increase this year, with the prospect of the Bank of England increasing interest rates in the coming months.

Hargreaves Lansdown head of retirement analysis, Helen Morrissey, said annuity rates are still some way off the highs seen in the weeks following the mini-Budget when a 65-year-old could have secured an annual retirement income of £7,586, but when compared with where they were two years ago at £4,979, savers are currently able to translate their pension pots into better value annuities than has been the case for most of the past few years.

“After years of being consigned to the sidelines of retirement planning, annuities are once again taking centre stage and with more interest rate rises on the horizon there’s every chance, we could see further income increases in the months to come,” said Morrissey.

“For those in need of some level of guaranteed income in retirement, annuities should always be a consideration. However, their reputation for being inflexible and offering poor value for money has made people hesitate. Their improved fortunes will certainly prompt more people to take a closer look.”


This article first appeared on our sister title, Pensions Age.

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