Annuity rates for 65-year-olds jump 19% since 2016, analysis finds

A 65-year-old buying a retirement annuity now could potentially generate an income over £800 higher than if they had purchased a deal two years ago, analysis has found.

Hargreaves Lansdown said annuity rates tumbled following the Brexit vote in summer 2016, bottoming out in September of that year.

But it found annuity rates for 65-year-olds have seen a 19% jump since hitting their 2016 low point.

It found that when rates were at their September 2016 low, a 65-year-old with a £100,000 pension could buy a non-increasing annuity income of £4,495.

But now the same pension pot could buy an income of £5,341 – an increase of £846, or 19%, based on the best standard annuity rates available.

People using their pension pot to buy an annuity give themselves a fixed income to live on.

But following the launch of the pension freedoms in 2015, over-55s have much more choice over how they use their pension pot and they are no longer required to buy an annuity.

There has also been an uplift in annuity rates for other age groups, the research found.

A 60-year-old with a £100,000 pot could now potentially buy an income of £4,727 – £871 or 23% more than in September 2016 when they could have generated £3,856.

And a 70-year-old could now get £6,044 – around 15% or £782 more than two years ago at £5,262, the analysis found.

An advantage of annuities is that they ensure people do not out-live their savings, although they have been controversial due to some poor rates and concerns that people have locked themselves into a deal without shopping around.

Nathan Long, a senior analyst at Hargreaves Lansdown, said that while the number of annuity providers on the market has been shrinking “those that are left are providing competitive rates”.

He continued: “You should always shop around to ensure you are getting the very best deal for your personal circumstances.”