Annuity rates increased by 20 per cent in the last twelve months adding over £25,000 income over the lifetime of the product.
Standard Life annuity rate tracker shows rates have increased by 20 per cent since June 2022 with a total increase of 48 per cent since the start of 2022.
The life and pensions provider, part of Phoenix Group, said the hike had resulted in an increase of over £25,000 and £27,900 for a 65-year-old man and woman respectively.
Standard Life's tracker estimated that someone looking to buy an annuity could expect to receive an annual income of £7,115 based on a £100,000 pension pot, an increase of £1,227 on the £5,888 they would have received in June of 2022.
Current Rates and Total Expected Income (2023) | ||||
Age | Average Annuity Rate | Annual Income | Total Expected Income - Female | Total Expected Income - Male |
60 | 6.39% | £6,387 | £172,455 | £155,849 |
65 | 7.11% | £7,115 | £158,660 | £142,296 |
70 | 7.93% | £7,935 | £141,234 | £125,365 |
Source: Standard Life annuity tracker
Standard Life said it had launched the tracker to increase awareness of annuity prices. It said a survey it commissioned found most over 50s aware of annuities did not monitor rates and almost half said they did not know what was good value for money.
The total annuity market was at its highest quarter since pension freedoms during the first three months of 2023, according to the ABI, with two thirds of the growth being driven by more customers and one third driven by higher average premiums.
Annuity and drawdown
Pete Cowell, head of annuities individual retirement at Standard Life, said: “Annuity rates have improved significantly over the last year, meaning pension savers can get much more for their money than before. This, coupled with the certainty and security offered by a guaranteed income, makes the value offered by annuities hard to ignore, and especially in the current climate in which every penny counts. For those wishing to explore the value of an annuity, there is the possibility of annuitising at different points during retirement, allowing people to benefit from higher rates and greater income.
“We’re entering a new era of retirement income planning, in which we’re moving away from the notion of retirement income being a one and done approach. When it comes to retirement planning, people need to consider what they expect their retirement to look like, based on their individual circumstances, and work out how best to make the most of their retirement savings.
"What’s becoming more appealing is the idea of a blended approach, with annuities and drawdown working in combination to meet different needs in retirement. This approach allows a portion of savings left in flexible drawdown and with the potential to grow, and the annuitised portion providing an element of guarantee to cover essential costs in retirement.”
