Figures from Hargreaves Lansdown have shown that annuity rates have reached a five-year high, having benefited from a rise in yields on corporate bonds amid fears that inflation will climb in the second half of this year.
A male worker with pension savings of £100,000 who retires at 65 can purchase an annuity of £7,660 a year, compared with £6,920 in March 2006. This 11% increase is despite the rise in life expectancy which has made it more expensive to provide annual retirement income.
Nigel Callaghan, a pension analyst at Hargreaves Lansdown, said that the costs of increased longevity had been offset by the effects of the credit crunch and commented: “yields on corporate bonds have widened significantly, which many retiring investors are taking full advantage of by locking into the highest rates since 2003.”
