Canada Life, an annuity provider, said the number of savers requesting an annuity quote jumped 51% in the 10 days between September 18 and September 27 compared to the same period last year. last.
Annuities are expected to settle at today’s higher rates, according to William Burrows of the Retirement Planning Project, a financial advisory firm. “Rates won’t be falling anytime soon as the cost of long-term borrowing and inflation will remain high,” he said.
Mark Ormston, a financial adviser, said annuities were becoming an increasingly attractive option for retirees with excess cash who wanted to secure an income to cover essential expenses and worry less about money. impact of the stock market on their invested pension.
“Using a combination of annuities and pension withdrawals would give the best result for the majority of people,” he said. “We are likely to see further interest rate hikes, so better rates could be on the horizon.”
However, he advised against trying to time the market. “On average, it takes two months to finalize the purchase of an annuity. The majority of providers will automatically pass on rate increases, so you will always benefit from an increase if there is a significant movement in the market during this period.
While annuity rates are at their highest level in 10 years, they could climb even more next year. Market expectations are that the Bank of England could raise the Bank Rate to 5.75% next year.
In this scenario, the rate of a £100,000 ‘joint’ annuity, which continues to be paid to a spouse after the death of the insured, could exceed £6,000 next year, according to the Retirement Planning Project .
It currently stands at £5,795, a 47% increase since January, when pensioners received £3,497. Ms Morrissey said those worried about locking themselves into an annuity now and missing out on possible higher rates in the future could take a more gradual approach.
“Annuity in stages throughout retirement, rather than making the whole pot at once, allows you to qualify for better rates as you get older,” she said.
“You may also qualify for an ‘enhanced’ annuity at a later stage.” An enhanced or “impaired life” annuity offers higher payouts to retirees with serious medical conditions.
