Rising annuity rates have shortened the break-even period by seven years compared with 2021, analysis by Canada Life has indicated.

Current annuity rates mean the payback period is now 14 years on a Canada Life benchmark £100,000 annuity (as at 26 March 2026) bought by a 65-year-old (with no health or lifestyle factors), generating an income of £7,373 a year.

By comparison, the same £100,000 annuity in 2021 would have required 21 years to recover the initial investment, providing an income of £4,662 a year.

Life expectancy data from the Office for National Statistics has shown that most retirees from age 65 are expected to live for roughly another two decades.

At today’s rates, a typical 65-year-old would reach the break-even point several years sooner than in 2021, meaning more of their expected 20-year retirement would be spent receiving payments over and above the original £100,000 investment.

Commenting on the research, Canada Life retirement income director, Nick Flynn, said: “The current macroeconomic environment means annuity rates remain at some of their highest in a decade. As a result, people are recouping their initial outlay significantly earlier than they would have done just five years ago.

“Attractive pricing and the certainty of a guaranteed income for life is increasingly valuable as people live longer and face extended retirements, making annuities a strong choice for those seeking financial stability and peace of mind.

Flynn also acknowledged that the inclusion of pensions in inheritance tax calculations from April 2027 is generating further interest in annuities from the public.

“We are currently in a buyer’s market,” he continued, “so prospective retirees should shop around before purchasing an annuity to ensure they secure the best possible rate."

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