Average annuity rates have hit a 14-year high, having increased by 52% in the past nine months, according to new data from Canada Life.

As a result of this, the point at this an individual would receive their original pension back through income, has reduced by seven years, falling from 22 years to 15 years.

A benchmark annuity of £100,000 at age 65 would now pay a guaranteed income of £6873 a year. This compares to £4521 at the start of 2022. Inflation-linked annuity rates have also seen a significant improvement over the last nine months, with rates improving by 77%. A benchmark £100,000 annuity linked to RPI will now pay a starting income of £3896, compared to £2195 at the start of the year.

Nick Flynn, retirement income director, Canada Life commented: “It’s 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% 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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