Average annuity rates for a healthy 65-year-old have increased by 2.5 per cent since January 2024, according to the Standard Life annuity rate tracker.

This has added £3,360 and £3,720 to the total lifetime income expected for a healthy 65-year-old man and woman, respectively.

The recent increase means that a 65-year-old considering taking out an annuity could expect to receive an annual income of £6,980 based on a £100,000 pension pot, an increase of £170 compared to the start of the year.

Standard Life head of annuities, Pete Cowell, said annuity rates continue to provide the "security and certainty" people are looking for in retirement.

However, while rates have increased overall since the start of the year, the last quarter did see a slight dip, with the rates for a healthy 60-year-old and 65-year-old falling by 1.75 per cent and 1.48 per cent, respectively, and for a healthy 70-year-old falling by 1.30 per cent.

The tracker also revealed the extent to which annuity rates improve with age, as, as of the end of September 2024, the rate for a healthy 60-year-old was 6.27 per cent, compared to 7.81 per cent for a healthy 70-year-old.

This resulted in an annual income of £6,270 for a 60-year-old versus the £7,810 a healthy 70-year-old may expect to receive on a £100,000 pension pot – a difference of £1,540.

Cowell said the improved annuity rate is "certainly reflected" in wider industry data, noting:
"A 38 per cent increase in annuity sales from 2022/23 to 2023/24 demonstrates the increasing recognition of the valuable role annuities can play in providing guaranteed income."

Last week, data from Origo research showed that more than half (55 per cent) of annuity buyers in the past year have shopped around for the best terms and switched from their existing provider.

This signalled an improvement on previous years, with data from Financial Conduct Authority (FCA) revealing that 50 per cent of pension savers who bought annuities in the four years up to mid-2022 did not compare deals from different providers.

---