Lifetime annuity rates continue to improve in 2024, according to the latest Standard Life Annuity Rates Tracker, which finds that that the average annuity rate for a healthy 65 year old reached 7.08% in June.
This is a c.4% improvement since January 2024 and 2.64% since March, adding an extra £3,659 to the total lifetime income* expected for a 65-year-old man and £4,059 for a 65-year-old woman, compared to March rates.
Annuity rates have continued to marginally improve since the start of the year, with the average rate for a healthy 60-year-old improving from 6.16% in January to 6.38% in June. Meanwhile, for a healthy 70 year-old, the rate has improved by 7.64% to 7.91% over the last six months.
These increases mean that annual income has improved by £127 pa for a healthy 60 year-old, £182 pa for a healthy 65 year old and £123pa for 70 year old.
About the 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.
Total lifetime income*
According to the Tracker, a healthy 65-year-old male who bought an annuity in June 2024 at a rate of 7.08% could expect a total lifetime income of £142,374. For a female of the same age, the expected income was £157,958.
Meanwhile, a healthy 70-year-old who bought an annuity in June 2024, could expect a rate of 7.91%. For a man, this would provide a total lifetime income of £125,835, while a woman could expect to receive £141,664.
*Total expected income figures are based on life expectancy statistics from the Office of National Statistics, based on age annuity is first purchased. Total expected income includes annuity income only.
Improving rates with age
Purchasing an annuity earlier in retirement typically results in higher overall income. However, annuity rates tend to increase with age, meaning those who choose to buy an annuity later in retirement are likely to benefit from better rates.
As of the end of June 2024, rates for a healthy 60-year-old were 6.38%, compared to 7.91% for a healthy 70-year-old. This results in an annual income of £6,381 for a 60-year-old versus the £7,914 a healthy 70-year-old may expect to receive on a £100,000 pension pot – a difference of £1,533.
Pete Cowell, Head of Annuities at Standard Life, part of Phoenix Group, said: “It’s welcome to see that annuity rates have enjoyed a slow but steady improvement throughout the first six months of the year. While rate improvements are welcome news, the main benefit of an annuity is that it delivers income certainty in retirement, something which 92% of people say they want, according to Standard Life’s Retirement Voice1study.
"While income certainty is important, people want to feel in control of their finances. For many, a blended approach often proves more beneficial, incorporating annuities as part of a broader solution. Rather than simply deciding whether to annuitise, people should consider how much of their retirement savings they could use to buy an annuity, as well as what age best suits them, and keep this under review if circumstances change, especially since annuity rates typically improve as you age."
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