Lifetime annuity rates have continued their upward climb in 2024, offering welcome news for those looking to secure their retirement income.
The Standard Life Annuity Rates Tracker shows consistent improvement across all age groups, with rates steadily increasing throughout the first six months of the year. For example, a healthy 60-year-old saw their rate rise from 6.16 per cent in January to 6.38 per cent in June, translating to an annual salary increase of £127. Similarly, a healthy 70-year-old witnessed an increase from 7.64 per cent to 7.91 per cent, leading to an extra £123 per year.
These improved rates directly impact the lifetime income potential of an annuity. A 65-year-old man purchasing an annuity in June 2024 at the current rate of 7.08 per cent could expect to receive a total lifetime income of £142,374, while a woman of the same age could expect £157,958. This highlights the importance of considering annuity options as a means of securing a guaranteed income throughout retirement.
Pete Cowell, Head of Annuities at Standard Life, commented on the positive trend: "It's encouraging to see annuity rates gradually improving over the first half of the year. While this is good news, the primary benefit of an annuity is providing income certainty in retirement, something that 92 per cent of people expressed a desire for, according to our Retirement Voice study."
However, Cowell also emphasised the need for a balanced approach to retirement planning: "While income certainty is crucial, people also want to feel in control of their finances. A blended strategy, incorporating annuities as part of a wider solution, often proves more beneficial. Instead of simply deciding whether or not to annuitise, individuals should consider how much of their retirement savings they could allocate to an annuity, and at what age it best suits them. This approach should be regularly reviewed in case circumstances change, especially since annuity rates typically improve with age."
The rise in annuity rates signals a positive trend for those approaching retirement, providing an attractive option for securing a guaranteed income stream. However, individuals are encouraged to carefully consider a range of options and factors, including their individual financial situation and risk tolerance, before making a decision.