A £100,000 pension pot could now secure a significantly higher income in retirement, with recent market shifts driving up annuity rates.
Experts have explained how much a 65-year-old could expect to receive annually and why shopping around for the best deal has never been more important.
A 65-year-old with a £100,000 pension can now get up to £7,882 per year.
Retirees can get this guaranteed income for life through a single life level annuity with a five-year guarantee, according to latest data from Hargreaves Lansdown's annuity search engine.
This is up 63 per cent on what was available five years ago.
Average annuity rates have risen five per cent over the past year
GETTYHelen Morrissey, head of retirement analysis Hargreaves Lansdown said: "Annuity incomes have been a ray of sunshine for retirees in these turbulent times.
"Inflation-linked products have also been on the rise with one that rises three per year currently offering up to £5,786 per year.
"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."
Using an annuity search engine is crucial for retirees
GettyUsing an annuity search engine is crucial for retirees to understand what the market can offer before making their final decision.
This revival in annuity values has driven increased market interest, with Financial Conduct Authority retirement income market data showing sales up 38.7 per cent in 2023/24.
Morrissey has warned that while annuity incomes are currently strong, they may begin to dip if the Bank of England starts cutting interest rates — as widely expected in May.
A pension expert has warned there will be 'fewer working age people to fill the gap' to pay for the state pension
PAHowever, she urged savers not to panic. Rates aren’t expected to drop as sharply as they rose, and a return to the ultra-low levels seen in previous years is unlikely.
She also stressed the importance of shopping around and not just accepting the first quote offered. She said: "Taking the time to look across the market could leave you thousands of pounds better off over the course of your retirement.”
Morrissey noted that retirees don’t need to annuitise their full pension all at once.
Buying annuities in stages can provide greater flexibility and allow income to rise over time — particularly for those who may qualify for enhanced annuities due to age or health conditions.
She said: "You can secure guaranteed income as your needs change. And if you develop a qualifying condition, you’ll get a further bump in income.”
