Story by Temie Laleye

A £100,000 pension pot could now secure a significantly higher income in retirement, as improved annuity rates offer better value for those seeking guaranteed lifelong payments.

The latest data shows a 65-year-old with a £100,000 pension pot can secure an annual income of up to £7,814 from a single life level annuity with a five-year guarantee. This compares to just £5,724 per year from an annuity that increases by three per cent annually.

This substantial difference of over £2,000 per year in initial income explains why level annuities remain the most popular choice among retirees. The immediate financial benefit is compelling, particularly for those prioritising higher income in the early years of retirement.

The vast majority of annuity purchases are level products that don’t increase over time, according to Hargreaves Lansdown.

Pensioners face a crucial decision when purchasing annuities, with new data revealing stark differences between level and inflation-linked options.Couple at laptop

Couple at laptop© GB News

The choice between higher initial income or inflation protection represents one of the most important financial trade-offs for retirees.

While level annuities offer substantially more income in the early years of retirement, inflation-linked alternatives provide increasing payments that may prove valuable over a potentially lengthy retirement period.Request a brochure today - Transform your retirement

This decision has long-term implications for pensioners’ financial security and purchasing power.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, cautions against focusing solely on initial income.

She said: “However, with retirement potentially lasting twenty years or more the issue of inflation does need to be taken into account.

If you take out an annuity, you have to hand over all your hard earned.

It’s a gamble with your future as you do not know what interest rates will be when you wish to retire. If you were unlucky, you could be offered

Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year.
Oct 22

Don’t let that be you, unless when you retire interest rates have spiked and then it could be an option.