Average annuity rates continue to rise during third quarter

Rates continue to remain ‘well above’ historic low levels

Average annuity rates continued to rise in the third quarter of 2023 Q3, according to the Standard Life annuity rate tracker.

The tracker, developed by Standard Life, part of Phoenix Group, monitors current average annuity rates across the market for those annuitising at ages 60, 65, and 70. It also shows the total lifetime income from an annuity and the extent to which annuity rates improve with age.

The most recent tracker showed that rates for a healthy 65-year-old reached 7.25% in September 2023 compared to 7.11% in June.

This means that a 65-year-old looking to buy an annuity in recent weeks could expect to receive an annual income of £7,248 based on a £100,000 pension pot. Over the course of a someone’s lifetime, this could result in a £2,500 increase in the total lifetime income a 65-year-old might expect to receive when compared with rates in June 2023, depending on when someone purchased an annuity.

The tracker also found that the total expected lifetime income for the average female who bought an annuity at 65 had increased from £158,660 in June 2023 to £161,623 in September 2023 – a difference of over £2,900. The equivalent figure for a male was £142,296 to £144,953 – a difference of over £2,500.

Standard Life noted that while purchasing an annuity earlier in retirement will result in higher income overall, annuity rates also increase with age. This means that those who decide to purchase one later in their retirement are likely to benefit from higher rates.

Based on rates at the end of October 2023, the tracker showed a 25% difference in annuity rates based on someone who chooses to annuitise at 60 versus 70. An individual purchasing an annuity at the age of 60 could expect to receive an annual income of £6,525, £7,248 at 65 and £8,178 at 70.

Head of annuities Pete Cowell said: “An annuity is there to help pension savers secure income certainty in retirement, something we know is important to nine in ten adults and the results of our latest annuity rate tracker show that rates rose slightly in September.

“While early indications for the final quarter of the year suggest that rates have fallen back a little, what is important to note is that they continue to remain well above the historic low levels seen previously. This latest Tracker shows that, even with slight differences throughout 2023, it continues to be a good time to consider the comfort offered by a guaranteed income in retirement.”

Cowell continued: “When considering an annuity purchase, there are several factors that may impact the income you receive, such as health conditions or whether you want additional benefits such as value/capital protection so you can leave a lump sum on death to your loved ones.

“It is also worth thinking about the benefits of a ‘mix and match’ style approach, with an annuity being used to cover part of your outgoings and keeping some income in drawdown to cover everything else. Through this approach, pension savers could be able to benefit from the best of both worlds – achieving security of income and flexibility with your retirement savings.”

In September this year, Standard Life launched a new individual annuity called the Standard Life Pension Annuity for those who want guaranteed pension income.

Isabel Baxter (Professional Adviser)

Retirement ProfessionalsAverage annuity rates continue to rise during third quarter