Annuity rates have reached an 18-year high in recent weeks, with the top rate for a healthy 65-year-old hitting 8%. This means a £100,000 pension pot could provide an annual income of £8,000, which is hundreds of pounds more than if an annuity had been purchased last year.
Both Scottish Widows and Canada Life are currently offering rates exceeding 8% for a 65-year-old, with payouts of £8,155 and £8,120 per year respectively. Two years ago, the highest available amount was around £7,100 annually, and in February 2023, it was £6,600.
The increase in annuity rates is linked to global factors such as persistent inflation and governments issuing more debt, which have kept gilt yields high in 2026. Annuities are typically priced in relation to 15-year gilt yields, which reached a 20-year peak of 5.7% at the beginning of September.
Retirees can choose from various annuity types, including enhanced annuities for those with health conditions, joint-life annuities for couples, escalating annuities to mitigate inflation, and guaranteed annuities that ensure payments for a set period. Shopping around for rates is advised, and financial advice is available from regulated advisers or services like Pension Wise.