The standard annuity rate has increased by 5.6 per cent since 12 May, its highest level for the whole of 2015.
The latest analysis by My Pension Expert - based on a 64 year-old with a £100,000 pension pot and a single-life annuity - found this individual would now be £303 a year better off than seven weeks ago.
In mid-May the best offer available to them was £5,370 and this has subsequently jumped to £5,673 today (30 June), equating to an extra £6,060 over the course of an average 20-year retirement.
The increase can be explained by the rise in gilt yields, which are intrinsically linked to annuity rates, boosted in June as a result of comments from the Bank of England Monetary Policy Committee member Martin Weale indicating he may vote to raise interest levels.
My Pension Expert said this led the yields to reach their highest levels this year, with the standard annuity rate following suit.
Scott Mullen, director at the firm, said that this is great news for those considering purchasing an annuity, as it could lead to a significant increase in their retirement income.
“It demonstrates just how volatile the market is and why it requires constant monitoring if you’re to make the most of your pension funds.
“Now is a good time for those in drawdown to re-evaluate their options, as this month’s increase could be the tipping point that persuades them to purchase an annuity.”
He added that it is always best to seek advice when deliberating retirement decisions, as there are so many different options since the launch of the freedoms.
“An adviser can individually tailor a policy to perfectly suit the requirements of a retiree, meaning they can rest safe in the knowledge that they have secured the absolute best deal for themselves.”
At the end of January, My Pension Expert revealed that annuity rates had fallen by 10 per cent since the previous August, having tumbled at a “dramatic pace” since the last Budget.
peter.walker@ft.com
