Professional Adviser confirms that UK annuity sales reached £7 billion in 2024. This marks a 34% increase from 2023, while the number of annuity contracts (around 89,600) represents a 10-year high.

The figures from the Association of British Insurers (ABI) also point to an encouraging increase in advice take-up among those choosing an income for life.

High interest rates and rising gilt yields are just a couple of the factors that mean annuities are back in vogue. Now more than ever, though, it’s important to shop around to ensure you get the best annuity deal.

Keep reading to find out more.

Consumers are turning to the stability of annuities amid economic uncertainty

The ABI report confirms that the appetite for a guaranteed income for life is on the rise. In part, this is likely due to turbulence in the markets and continued global political uncertainty.

In a changing economic landscape, the stability of a known income after you finish work can provide peace of mind and a sense of control.

While recent commotion in the bond market has left some investors spooked – gilt yields soared to their highest level since 2008 – it has been good news for annuity rates, especially coming off the back of already impressive highs.

MoneyWeek recently reported that while average annuity rates have risen 9.5% over the past year, the income you could receive currently is even more impressive compared to rates five years ago.

Quoting data from Hargreaves Lansdown, MoneyWeek suggests that a £100,000 pension pot could provide the average 65-year-old with an annual income of £7,425. This is higher than the £6,781 it would’ve provided in January 2024 and far exceeds the £5,094 they might have received five years ago.

These figures are based on annual income from a single-life annuity on a level basis, guaranteed for five years.

An annuity makes budgeting relatively easy but it is unflexible compared to some Pension Freedoms options

Over the last few years, the global economy has faced challenges.

Rising inflation in the wake of the Covid pandemic was exacerbated by Russia’s invasion of Ukraine and (among other factors) prompted the cost of living crisis. World elections – including a change of UK government and the re-election of Donald Trump – have led to uncertainty and the Israel-Gaza conflict has also had an impact on markets.

In this turbulent climate, the known and stable income of an annuity can be appealing, as recent figures attest.

An annuity provides a guaranteed income for life on a basis you choose. You can opt to usually take up to 25% of your pension pot as tax-free cash and decide the frequency of your payments. Other options might include a spouse’s pension, a guaranteed payment period, or an income that rises each year to combat inflation.

Remember, though, these additional benefits are generally more expensive and will lower your starting income.

It’s also worth noting that compared to Pension Freedoms options an annuity lacks flexibility. The stable income it provides, though, should make retirement budgeting much easier.

Shopping around is key to ensuring you receive the best annuity deal

MoneyWeek confirms that 36% of those who bought an annuity in 2024 sought professional financial advice first. This is up from 29% the year before 2023.

The inflexibility of an annuity is one reason to seek advice before you take the plunge. Once you pick your pension basis you’re stuck with it, and as with all decisions that affect your retirement, the repercussions of your choices – both good and bad – can be long term.

Another reason to seek advice is that we can help you to shop around for the best deal.

As well as a rise in those seeking advice, the report also found that retirees were more willing to move away from their current providers.

Previously, you might have felt a certain degree of loyalty to your provider, having paid into a pension with them for years or even decades. It’s possible that you weren’t even aware of the option to transfer away at the point of purchasing your annuity.

In 2024, 69% of annuity purchasers chose a new provider to supply their annuity, up from 64% in 2023.

The Times Money Mentor lists the best annuity rates on the market and reports on the wide difference between the best and lowest available rates. It finds that the income for a healthy 75-year-old could increase by almost a fifth by moving from the worst available rate to the best.

At The Pension Planner, we understand what motivates you. We can search the market for the right annuity for you, ensuring you stay on track to achieve your goals, long after you retire.

Remember too that an annuity could form just a part of your overall plan and you might opt to take more flexible options alongside your regular income.

Get in touch

If you need help deciding if an annuity is right for you, get in touch. Email info@thepensionplanner.co.uk or call 0800 0787 182.

Please note:

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.