Annuity incomes have soared to a new record high, despite economic turmoil.
The latest data from Hargreaves Lansdown’s annuity search engine shows a 65-year-old with a £100,000 pension can now get up to £7,882 per year from a single life level annuity with a five-year guarantee.
This figure is up 63% on what was available five years ago.
Inflation-linked annuities are also on the rise with one that rises 3% per year currently offering up to £5,786 per year.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Annuity incomes have been a ray of sunshine for retirees in these turbulent times. These increases are welcome news for anyone in the market for a guaranteed income in retirement and have contributed to a real revival in a market that was once considered on the edge of extinction. 2024 was a bumper year for the annuity market and current rates will continue to fuel interest.”
However, Morrissey warned that an interest rate cut in May could put downward pressure on annuity incomes.
“The expectation is that the Bank of England will cut interest rates in May and may look to reduce them still further in its bid to shore up growth. Such a move could well put downward pressure on annuity incomes and so we could see them falling back over the coming months.
“It’s important not to panic though. Interest rates are not expected to fall anywhere near as quickly as they were raised, and we are not expected to see a return to interest rates anywhere near as low as we saw in recent years so we aren’t expecting annuity incomes to return to the much lower levels they hit a few years back.”
Morrissey said pension savers considering annuitising should do their research, taking their time to look at different providers.
“You also don’t need to annuitise all your pension at once. You can annuitise in stages as you go through retirement. This means you can secure guaranteed income as your needs change and leave the rest invested where it has the opportunity to keep growing. As you age you will also be able to secure incomes at higher rates and if you have developed a condition that qualifies you for an enhanced annuity then you will get a further bump in income,” she added.
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