Annuity incomes have surged to a 16-year high, data from Hargreaves Lansdown has shown.
Its analysis found 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. It marks the highest level since December 2008, when men could get £7,646 per year.
A drop in interest rates in the aftermath of the 2008 financial crisis saw annuity rates dragged lower, falling to a low in the wake of the Brexit vote.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “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 Freedom and Choice reforms.”
Morrissey said rising interest rates have seen incomes climb in recent years and people’s interest grow in tandem. According to the Association of British Insurers, 2024 was a bumper year for annuities with sales of £7 billion.
“It’s a momentum that will continue into 2025 as people mull the best option for securing a guaranteed income in retirement,” Morrissey said.
To get the most from annuities, Hargreaves Lansdown said it is crucial that people shop around and provide all their health details, which may entitle them to a higher rate of income.
The investment platform said pension savers should also consider purchasing guaranteed income in slices through retirement.
“This enables you to secure income as your needs change while leaving the rest of your pension invested where it can grow. You can benefit from higher incomes as you age and if you develop a condition that qualifies for an enhanced annuity then you could get an extra income boost,” said Morrissey.
Main image: derek-thomson-NqJYQ3m_rVA-unsplash
