Average annuity rates have hit a 14-year high, having increased by 52 per cent in the past nine months, figures from Canada Life have revealed.

Canada Life detailed that the break-even point, or the point at which someone would receive their original pension back through income, has reduced by seven years as a result, falling from 22 years to 15 years.

It also revealed that a benchmark annuity of £100,000 at age 65 would now pay a guaranteed income of £6,873 a year, representing an increase of £2,352 on the £4,521 at the start of 2022.

Inflation-linked annuity rates have seen a significant improvement over the past nine months, with rates improving by 77 per cent.

Canada Life also detailed that a benchmark £100,000 annuity linked to RPI will now pay a starting income of £3,896, compared to £2,195 at the start of the year.

Industry experts have previously suggested that annuities could be making a "fight back" amid changes in interest rates, with suggestions that new pension models, such as a 'flex first, fix later' pension, could help ensure savers benefit from both flexibility and the guaranteed income of an annuity.

However, there are still challenges surrounding annuities, with industry research suggesting that although there has been a rise in the number of people purchasing annuities in later life, many are still reluctant to buy annuities because they do not understand them.

Canada Life retirement income director, Nick Flynn, commented: “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.”

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