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.
UK pension annuity sales surged to £7bn in 2024, marking a 10-year high and a significant 34 per cent increase from 2023, research from Association of British Insurer’s has shown.
The market saw 89,600 annuity sales throughout the year, representing a 24 per cent rise as more retirees sought guaranteed income solutions for their retirement.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "After years in the doldrums, the market has been kick-started off the back of rising interest rates and soaring gilt yields and this has tempted retirees back to the market."
HL data has shown that current annuity rates offer attractive returns, with data showing a 65-year-old with a £100,000 pension pot can secure an annual income of up to £7,490 through a single life level annuity with a five-year guarantee.
More retirees are actively shopping around for the best annuity deals, with seven in ten (69 per cent) choosing a different provider from their pension savings holder in 2024.
This marks an increase from 64 per cent in 2023, showing growing awareness of the importance of comparing rates.
Nick Flynn, Retirement Income Director at Canada Life, said: "There can be significant difference in annuity rates between providers, so this is a smart move by the customer."
LATEST DEVELOPMENTS:
Clare Moffat from Royal London noted that people often seek "certainty, simplicity, an income that will last as long as they do, and protection for their dependents" - characteristics that align with annuity products.
Larger pension pots are increasingly being used to purchase annuities as customers seek to capitalise on high rates, according to industry experts.
Flynn added: "It's not uncommon to now see pension funds in excess of £500,000 looking to secure an annuity, dramatically increasing the average purchase price."
The trend is expected to continue, particularly with upcoming changes to inheritance tax rules.
Pete Cowell of Head of Annuities at Standard Life: "We anticipate demand for annuities will remain strong, particularly with changes from the October Budget bringing pensions into scope for inheritance tax from 2027.
"The majority of people say they want some form of certainty with their retirement income, and annuities do just that - providing peace of mind through a regular, guaranteed income."
He highlighted the flexible ways annuities can be integrated into retirement planning.
Cowell added: "Lifetime annuities offer the security of an income for life, while fixed-term annuities provide certainty for a set period, allowing retirees to reassess their options later.
"Purchasing annuities in stages can also help mitigate the impact of inflation and market fluctuations."
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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.
UK pension annuity sales surged to £7bn in 2024, marking a 10-year high and a significant 34 per cent increase from 2023, research from Association of British Insurer’s has shown.
The market saw 89,600 annuity sales throughout the year, representing a 24 per cent rise as more retirees sought guaranteed income solutions for their retirement.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "After years in the doldrums, the market has been kick-started off the back of rising interest rates and soaring gilt yields and this has tempted retirees back to the market."
HL data has shown that current annuity rates offer attractive returns, with data showing a 65-year-old with a £100,000 pension pot can secure an annual income of up to £7,490 through a single life level annuity with a five-year guarantee.
More retirees are actively shopping around for the best annuity deals, with seven in ten (69 per cent) choosing a different provider from their pension savings holder in 2024.
This marks an increase from 64 per cent in 2023, showing growing awareness of the importance of comparing rates.
Nick Flynn, Retirement Income Director at Canada Life, said: "There can be significant difference in annuity rates between providers, so this is a smart move by the customer."
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Clare Moffat from Royal London noted that people often seek "certainty, simplicity, an income that will last as long as they do, and protection for their dependents" - characteristics that align with annuity products.
Larger pension pots are increasingly being used to purchase annuities as customers seek to capitalise on high rates, according to industry experts.
Flynn added: "It's not uncommon to now see pension funds in excess of £500,000 looking to secure an annuity, dramatically increasing the average purchase price."
The trend is expected to continue, particularly with upcoming changes to inheritance tax rules.
Pete Cowell of Head of Annuities at Standard Life: "We anticipate demand for annuities will remain strong, particularly with changes from the October Budget bringing pensions into scope for inheritance tax from 2027.
"The majority of people say they want some form of certainty with their retirement income, and annuities do just that - providing peace of mind through a regular, guaranteed income."
He highlighted the flexible ways annuities can be integrated into retirement planning.
Cowell added: "Lifetime annuities offer the security of an income for life, while fixed-term annuities provide certainty for a set period, allowing retirees to reassess their options later.
"Purchasing annuities in stages can also help mitigate the impact of inflation and market fluctuations."
Find Out More...