Average annuity rates have reached a 14-year high, rising by 52 per cent over the past nine months, according to recent data from Canada Life.
According to the data, the break-even point—the time when you would start receiving your initial pension back in income—has been lowered from 22 years to just 15 years.
At age 65, a benchmark annuity of £100,000 would now guarantee an annual payout of £6873 while at the beginning of 2022, this was £4521.
Over the past nine months, rates for inflation-linked annuities have also significantly improved, rising by 77 per cent.
A benchmark RPI-linked £100,000 annuity will now start the year with a starting income of £3896 as opposed to £2195.
Canada Life retirement income director Nick Flynn says: “It’s has been a record-breaking year for annuity rates, with incomes at a level we haven’t seen for over a decade. I’d need to look back to before the banking crisis of 2008/9 to see annuity rates at a similar level as today.
“In the current economic climate, where else could you receive nigh on 7 per cent risk-free income in retirement? That is how strong annuity rates are right now which is why they are worth more than just a second glance.
“With the right guarantees and value protection options, annuities can now give drawdown a good run for their money through the benefits available. Clients planning their retirements or looking to de-risk their investment portfolios should take another look at annuities.
“Clients should also look at using annuities alongside drawdown, rather than viewing in isolation or having all your eggs in the one basket. Phasing annuity purchases throughout retirement can not only de-risk your retirement journey, but you can also benefit from better annuity rates as you get older. With the right value protection, you can also ensure your wealth is protected and can be passed to loved ones.
“Anyone considering their retirement options should consult the expertise of a specialist annuity broker or the advice of a regulated financial adviser, before making any decisions.”
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