Pensioners looking for retirement annuity ‘could see rates boosted’

Unrest in the financial markets could provide a silver lining for pension savers, with the potential for annuity rates to rise in the weeks ahead, according to a financial information website.

Annuities allow people to convert pension savings into a guaranteed fixed income when they retire, giving people certainty over the amount of money they will have to live on.

Moneyfactscompare.co.uk said that rising gilt yields could push annuity rates up.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Pensioners looking to secure an annuity for a regular income could see a boost to the rates on offer in the weeks ahead.”

She added: “Rising gilt yields have been known to cause annuity rates to soar.

“If this comes to fruition, it could mean retirees become hundreds of pounds better off.

“During 2022, annuity rates shot up amid interest rate volatility and stock market uncertainty.”

People’s individual circumstances will vary, and Ms Springall said: “Seeking advice before making any rushed decisions is wise, no one knows how long the unrest will last.

“Circumstances can change, such as a deterioration of health or a change in someone’s risk preferences, so an annuity may be a suitable option to provide a guaranteed income during retirement.

“Those who may want a bit of flexibility could also choose part annuity and drawdown.”

There have been some recent signs of people using bigger pension pots to buy annuities.

In February, the Association of British Insurers (ABI) said that the total value of premiums paid into individual pension annuities grew by 4% annually to reach £7.4 billion in 2025 – the highest annual level since the pension freedoms, which gave people more flexibility over their pension pots, were announced in 2014.

Sales of annuities over £250,000 rose by 31% annually, and sales of annuities valued at more than £500,000 rose by 54%, the ABI said.

People with health issues which could mean a lower life expectancy may be able to get an enhanced annuity, which pays out a higher rate.

The ABI said previously that it has seen a growth in escalating annuities – products that increase payments each year – suggesting more customers are looking for protection against the erosion of income over time, including through inflation-linked options.