Annuity charges get well to hit a 6-month excessive

Annuities have hit their highest degree since December, in keeping with new knowledge.

A 65-year-old with a £100,000 pension might at the moment purchase an revenue of as much as £7,017 per 12 months, in keeping with Hargreaves Lansdown’s annuity comparability instruments.

Rising rates of interest have led to a surge in annuity charges over the previous 18 months.

With extra rate of interest rises from the Financial institution of England attainable, additional will increase to annuity charges over the subsequent few months could also be on the playing cards.

Annuity charges hit highs within the months following final Autumn’s mini-Finances earlier than drifting again down till current weeks.

Helen Morrissey, head of retirement evaluation at Hargreaves Lansdown, stated: “Annuity charges are on the rise once more with a 65-year-old in a position to get greater than £7,000 a 12 months from their £100,000 pension. The final time charges have been this excessive was again in December 2022.

“They’re nonetheless a way off the highs we noticed within the weeks following the mini-Finances when the identical particular person might have gotten an revenue of £7,586 per 12 months but when we evaluate them to the place they have been two years in the past (£4,979) then persons are actually getting way more for his or her cash than they as soon as did.

“After years of being consigned to the sidelines of retirement planning, annuities are as soon as once more taking centre stage and with extra rate of interest rises on the horizon there’s each likelihood we might see additional revenue will increase within the months to return.

“For these in want of some degree of assured revenue in retirement then annuities ought to at all times be a consideration. Nevertheless, their fame for being rigid and providing poor worth for cash has made individuals hesitate. Their improved fortunes will definitely immediate extra individuals to take a more in-depth look.”

Gross sales of annuities surged greater than a fifth through the first three months of this 12 months to succeed in their highest degree for eight years, in keeping with separate knowledge printed by the Affiliation of British Insurers final month. 

Between January and March 16,256 annuities have been offered.

Annuity premiums for the primary quarter of 2023 climbed 22% to succeed in £1.2bn, the very best worth since 2015 when the Pensions Freedoms have been launched.

• Comparisons are based mostly on a single life annuity with a five-year assure.