Annuity rates have climbed back above 7%, prompting financial experts to urge savers to secure deals while they can.
According to Standard Life, a healthy 65-year-old with a £100,000 pension pot can now purchase an annuity providing an annual income of £7,083 until their death. This represents a £182 increase since January, when average rates stood at 6.81%, compared to 7.08% in June.
Annuities are insurance products that exchange a lump sum of pension savings for a guaranteed income stream until the policyholder's passing. The payout amount is largely determined by the yield on British government bonds, or gilts, which are in turn influenced by prevailing interest rates.
The average rate for a healthy 60-year-old has also witnessed a rise, climbing from 6.16% in January to 6.38% in June. Similarly, the rate for a 70-year-old increased from 7.64% to 7.91% - translating to annual boosts of £127 and £123, respectively.
Financial experts are now advising savers to consider purchasing an annuity sooner rather than later, particularly given the possibility of a Bank of England interest rate cut next month - the first in four years.
William Burrows, a financial adviser at Eadon & Co, states: "Annuities are currently very competitive for those seeking to maximise returns from their pension pots, a situation that wasn't the case in the past."
He continues, "We are likely at the peak of the annuity rate cycle for the time being. While I don't anticipate drastic drops, rates will begin to ease as inflation is brought under control and interest rates decline. Therefore, now is a good time to buy an annuity, especially for those seeking peace of mind and the security of a guaranteed income."
It is important to note that thousands of savers were compelled to purchase annuities in the years preceding George Osborne's introduction of "pension freedoms" in 2015. These freedoms granted individuals greater flexibility with their retirement savings, allowing them to access their pension pots in various ways beyond the traditional annuity route.
