Annuity charges have risen by 35% over the previous 12 months to hit their highest level in a decade, based on 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 degree annuity with five-year assure).
Final September the identical retirement saver would have solely achieved an revenue of round £4,900 per 12 months, based on information from Hargreaves Lansdown.
The final time annuity charges had been this excessive was March 2010, when a 65-year-old male may get round £6,678.
Annuity charges have 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 following the choice right this moment by the Financial institution of England’s Cash Coverage Committee to extend the bottom price to 2.25%.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, stated: “Annuities as soon as dominated the roost in retirement revenue however the low charges on provide meant they confronted criticism that they supplied 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 massively.
“These rising charges may encourage individuals who wouldn’t have considered buying an annuity this time final 12 months to present them severe consideration.”
A separate report from Normal Life earlier this week stated that annuity charges had 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 in the beginning of 2022.
Nick Flynn, retirement revenue director at Canada Life, stated the rise was the 16th time this 12 months annuity charges have improved this 12 months.
He stated: “Annuity charges have continued to bounce again following modifications to base price and the enhancements in yields on gilts, with charges up round 40% this 12 months. This sustained development 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 best form annuity.”