Britons will be weighing up various options for their retirement, and many will be hoping to have the most cash possible at their disposal. One choice which is making a resurgence is the annuity – which provides a regular guaranteed income in retirement.
People can buy an annuity with all or some of their pension pot, but they are likely to get more for their money in the current climate.
According to Canada Life, a 30-year guarantee would now pay £59,940 additional income compared to rates at the beginning of the year, on a £100,000 initial purchase price.
The provider states its average benchmark annuity rates are up by 44 percent since January 2022 as the favourability of the option has increased.
Nick Flynn, Retirement Income Director, Canada Life, said: “Annuities have made quite a comeback this year, with guaranteed lifetime income back in vogue following the strong improvement in rates.
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Someone in good health could see the rate they are offered significantly improve.
As a result, people are always encouraged to disclose their health and lifestyle to their adviser, annuity broker or annuity provider.
But if a person dies “early”, their estate may not get their money back, unless a person has the right protection in place.
People may wish to combine annuities and drawdown options to create an outcome suitable for them, as it does not have to be an “either/or” decision.
But Mr Flynn stressed people should never just accept the offer from their existing pension provider.
Instead, they should always shop around the market to find the best rate for their circumstances.
The expert concluded: “For clients seeking income security in retirement, annuities can play a key role in retirement planning.
“It will always pay to shop around for not only the best rate, but also the right shape and type of annuity.
“Purchasing an annuity is a significant financial step and it is the role of advisers to help their clients understand the choices available and select the right annuity for a customers’ individual needs.”
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