Advisers are being encouraged to check and re-check the best annuities on offer to clients amid a flurry of rate changes as the market continues to shake off jitters from hitting rock bottom in 2016.
So far between 23 October and 23 November there have been eight rate changes, according to data from investment firm Hargreaves Lansdown.
Legal & General and Canada Life adjusted their rates on 23 November following earlier changes made by Hodge Life and Aviva .
L&G revised its enhanced annuity rates four times in November, albeit not always upwards. It referred to the changes as ‘reshaping’ meaning some rates were raised while others were dropped.
Overall the annuity market market has seen a 19 per cent upswing in rates offered to retirees compared to mid-September levels seen last year. Back then a £100,000 pension could buy a non-increasing annual income of £4,495. Now it buys an income of £5,349, Hargreaves said.
Senior pension analyst at Hargreaves, Nathan Long, said: “Annuity rates have surged since in recent months. Many people crave secure income but are not prepared to buy at any price, so recent changes in annuity rates should prompt advisers to take a second look at what is available.”
He added: “Annuity purchases do not have to be an all or nothing event, using only part of your pension to buy a guaranteed income potentially gives you the best of both worlds, security of income alongside drawdown for flexibility.”
Annuity rates suffered a blow after the Brexit vote in June 2016. By July of that year, the month immediately after the vote, the rates had already fallen on average 3.6 per cent, leaving a 65-year-old buying an annuity worse off at that time than a 60-year-old buying one six months before.
By mid-September the rates were down 27 per cent on the 12 months earlier, Hargreaves’ analysis showed.
Rates depend on the return on gilts as well as the life expectancy of customers and are set in line with the business’ particular needs at the time in terms of competition.
According to Hargreaves, the six months between October 2016 and March 2017, which coincided with the drop in annuity rates, saw the lowest number of annuity sales after pension freedoms were brought in, when a mere 33,561 annuities were bought - 16 per cent down year on year.
Mr Long said: "Whether the improvements in rates will be enough to invigorate the market just now is uncertain, however there is plenty of pent up demand because half of people going into drawdown are yet to start taking an income. They may look to an annuity when the time comes."
Annuity sales had already suffered from the pension freedom reforms first announced in 2014, which freed up the market by giving defined contribution savers access to the range of retirement options available.
Sales plummeted across the board as clients were seeking out new options including income drawdown and lump sum withdrawals as well as lifetime mortgages.
In June 2016 Legal & General reported it had sold more new lifetime mortgages in the first half of the year than annuities.