Annuity rates increased by 20% in the 12 months to June, according to a new report.

Rates have increased 48% since the start of 2022 for a 65-year-old, according to Standard Life’s Annuity Rate Tracker.

This has added over £25,000 to the total lifetime income a 65-year-old man might expect to receive, and over £27,500 for a 65-year-old woman. 

Someone currently looking to annuitise could expect to receive an annual income of £7,115 based on a £100,000 pension pot, an increase of £1,227 on the £5,888 they would have received in June of 2022.

The tracker monitors current average annuity rates across the market for those annuitising at aged 60, 65, and 70. It also shows the total lifetime income from an annuity and the extent to which annuity rates improve with age.

It found that total expected lifetime income for the average female who bought an annuity at 65 had increased from £130,707 in June of last year to £158,660 as of June 2023 – a difference of over £27,900.

The equivalent figure for a male was £117,116 to £142,296 – a difference of over £25,000.

Total expected income is based on life expectancies from ONS.

Pete Cowell, head of annuities individual retirement at Standard Life, said: “We’re entering a new era of retirement income planning, in which we’re moving away from the notion of retirement income being a one and done approach.

“When it comes to retirement planning, people need to consider what they expect their retirement to look like, based on their individual circumstances, and work out how best to make the most of their retirement savings.

"What’s becoming more appealing is the idea of a blended approach, with annuities and drawdown working in combination to meet different needs in retirement. This approach allows a portion of savings left in flexible drawdown and with the potential to grow, and the annuitised portion providing an element of guarantee to cover essential costs in retirement.”

• Annuity rates for the tracker are based on data provided by AMS Retirement and are accurate as of the end of June.