Annuity rates have been rising due to wider market unrest, with the average annual annuity income up by over £100 since March, analysis from Moneyfactscompare reveals.
Annual annuity income has risen by £106 in less than six months, standing at £3,653 now, up from £3,547 at the start of March 2026, based on a £50,000 purchase price.
Rising long-term gilt yields impact annuity rate pricing. In recent months the 10-year gilt yield has risen above 5% on more than one occasion, driven by prolonged unrest in West Asia and political uncertainty.
The popularity of annuities could well be set to rise, with unused pension pots falling under inheritance tax liabilities from April 2027. The Association of British Insurers (ABI) revealed the total value of premiums paid into individual pension annuities grew 4% to £7.4 billion in 2025, the highest annual level since pension freedoms were announced in 2014.
Rachel Springall, finance expert at Moneyfactscompare, said: “Pensioners planning to lock into an annuity may be delighted to find rates have been increasing, leading to the average annual income rising by over £100 in less than six months. Long-term gilt yields impact annuity rate pricing, and in recent months they have been rising due to prolonged conflict in the Middle East and political unrest. Ten-year gilts have breached 5% on a few occasions during 2026 and remain higher than the start of the year. It is entirely plausible for further volatility to long-term gilts, particularly surrounding the Autumn Budget.
“Annuities are due a resurgence in popularity over the coming years as they can be a way to reduce the overall value of an estate, with unused pension pots subject to tax on inheritance from April 2027. Retirees releasing funds out of their pension pots must get good advice to understand the longer-term impact on their retirement income, and whether an annuity is an appropriate choice, or if they should consider an alternative guaranteed fixed term income plan. There are varying income options on annuities, such as those that link to inflation or rise by a set percentage and applicants in poor health could even be eligible for an enhanced annuity. Making sure the annuity is set up correctly to suit a pensioner’s circumstances will be vital, such as a joint life annuity to continue payments to a beneficiary after death for the rest of their life. Sometimes it can be difficult to have wider conversations about later life, but it is really important to understand retirement options and estate planning for peace of mind.”
