The average annuity rate was 5.18 per cent at the end of November, or £2,591 a year on a £50,000 pot, according to Retirement Advantage.
Since the market low in August 2016, analysis of data supplied by Investment Life and Pensions Moneyfacts to Retirement Advantage for 30 November 2016, showed the average annuity rate has increased by 10.6 per cent.
The gap between the worst standard and best enhanced on a moderately impaired annuity is 26 per cent, the analysis which looked at level annuities without a guarantee and a purchase price of £50,000 at age 65 showed.
Andrew Tully, pensions technical director at Retirement Advantage, said: “Annuity rates were hit hard by falling gilt yields in the immediate aftermath of the vote to leave the European Union.
“Fortunately gilt yields are on the way up again. Providers are also pricing to attract business, and these two factors have combined to push annuity rates back up to pre-referendum levels.”
Fortunately gilt yields are on the way up again.Andrew TullyIn terms of the outlook for annuity rates, Mr Tully said there was continuing pressure on rates comes from people living longer, although there is evidence this trend is slowing.
He said: “While we all come to terms with Brexit and the change in US presidency, yields on gilts are likely to be volatile.
“There is light at the end of the tunnel in the form of clarity around insurers’ capital positions from Solvency II, while competition in the market is also likely to help rates. But this all combines to make the outlook for rates uncertain.”
David Trenner, technical director of Intelligent Pensions, said: “We have seen bond prices generally picking up a bit but no-one predicted the way markets reacted to Brexit or Donald Trump.
“Drawdown is not guaranteed unless you buy a product where you pay for guarantees. If you want guarantees buy an annuity. If you do not want guarantees invest appropriately for your personal circumstances.”
emma.hughes@ft.com
