Pensioners could see annual income boost of nearly £2,000 as interest rates reach 15 year high

Pensioners could see their annual income increase by nearly £2,000 after annuity rates were raised by 40 per cent.

Annuity provides pensioners with a regular guaranteed income during their retirement.

Individuals can use money in their pension to buy an annuity from insurance companies who in return for the investments, will give them regular payments during their retirement.

Previously, low interest rates have meant the payoff for buying annuities yielded a poor return.

But earlier this month, Interest rates were hiked up to four per cent, with the Bank of England increasing the rate for a 10th consecutive time.

Pensioners could see their annual income increase by nearly £2,000 after annuity rates were raised by 40 per cent.
Anthony Devlin

Interest rates are now at a 15 year high, at levels not seen since the autumn of 2008.

This rise in interest rates resulted in an increase in the rates offered on annuities.

Hargreaves Lansdown explained that a 65-year-old with a pension of £100,000 could get an income of as much as £6,892 a year from a single life level annuity.

At the same time last year the return was only £5,004.

This is an increase of £1,888.

Senior Pensions and Retirement Analyst, Helen Morrissey, said: “These quotes also assume a five-year guarantee and that income is paid monthly in advance.

“But bear in mind that income depends on your circumstances, quotes are only guaranteed for a limited time and rates change frequently so they could go up or down in the future,” she told the Express.

She continued: “It's also important to consider your options carefully as you can't usually change an annuity once it's set up.”

She urged people to go online and check what rates people could receive with their pension pot.

Pensioners could get more depending on their age and health.

Interest rates are now at a 15 year high, at levels not seen since the autumn of 2008.
Joe Giddens

People should also be aware that once an annuity is set up, it is hard to cancel or change the conditions of it.

The Hargreaves Lansdown website explained: “Normally you can’t change your options if your circumstances change.

“Annuity rates might rise in the future, but you won’t benefit from this if your annuity is already being paid.

“Unlike flexible retirement options, you can’t cash in your annuity.”