How have annuity rates changed?

After years of sitting at disappointing lows, annuity rates have risen sharply since 2022. This gives people approaching retirement more reason to consider an annuity as part of their income plan. Here, we take a look at how annuity rates have changed in recent years.

A quick look back

Annuities have long been valued for the security they offer, providing a guaranteed retirement income for life or a fixed term, whatever happens in the investment markets. While annuity rates were modest during years of low interest rates, they’ve strengthened considerably in recent times.

As the Bank of England raised interest rates to curb inflation, annuity rates climbed too. By 2022, providers were offering far more competitive incomes for retirees seeking reliability and peace of mind. Canada Life reported that by October that year, typical annuity rates had reached a 14-year high – a 65-year-old investing £100,000 could expect an annuity rate of around 6.8%, up from 4.5% at the start of 2022.

Rates continued to rise from there, and by May 2025 had reached a 16-year high according to Which?. By this point, a 65-year-old could secure a rate of around 7.9%. They’ve since remained highly competitive, prompting many people approaching retirement to lock in a guaranteed income for life.

The picture today

So, where are annuity rates now? While they’ve cooled slightly since May’s peak, they’re still in very good shape compared with where they were a few years ago.

According to annuity broker Retirement Line’s data (as at 2 November 2025), the current best available single-life annuity rate for a 65-year-old man is 7.71% from Legal & General. To put that in real terms, a healthy 65-year-old with a £100,000 pension pot could secure an annual income of around £7,710.

The top available rate rises even further for older retirees. A 70-year-old man could currently achieve an income of about £8,642 a year, based on a rate of 8.64%. The increase reflects the shorter life expectancy used in providers’ calculations, meaning older retirees typically benefit from higher annual payouts for the same pension amount.

That’s still a very strong position compared to the low-rate environment we saw for much of the past decade. Even though rates can move from month to month, they remain attractive for those seeking long-term income certainty.

‘Payback period’ now just 13 years

Recent analysis from Standard Life paints a similar picture. The annuity provider revealed that their headline rate of 7.65% as at September 2025 means the ‘payback period’ – the time it takes for someone to receive back the amount they used to buy the annuity – is now roughly 13 years.

That’s a huge improvement compared to when rates were at their lowest, when the same milestone could have taken around 23 years to reach.

What’s behind these changes?

The main driver of annuity rate movements is the yield on government bonds (gilts). When gilt yields rise, annuity providers can offer higher incomes because they earn more from the funds they invest on behalf of policyholders.

Other factors also play a part, such as life expectancy trends, inflation expectations and competitive pricing among providers. But gilt yields are the key link between broader economic conditions and the rates you see advertised.

What it means for people approaching retirement

For those nearing retirement, today’s annuity rates represent a real opportunity. After years of relatively poor value, annuities now offer a more competitive, stable and predictable way to generate income from a pension pot.

They won’t be right for everyone, but, the recent rate and income improvements have reopened the conversation for many people weighing up their options between annuities and income drawdown.

It’s also a reminder of the importance of shopping around. Rates can vary quite a lot between providers, and comparing the annuity market could mean a noticeably higher income for life.