Today’s competitive annuity rates mean the payback period is now 14 years on a benchmark £100,000 annuity purchased by a 65-year-old, generating an income of £7,373 a year.
That means the break-even point has been brought forward by seven years compared to 2021 data, according to Canada Life.
Its research looking at its own annuity rates shows that in 2021 the same £100,000 annuity would have required 21 years to recoup the initial investment, generating an income of £4,662 a year.
According to the latest figures from the Office for National Statistics, a 65‑year‑old woman is expected to live for another 21 years, and a 65‑year‑old man for another 19 years.
At today’s annuity rates, that means a 65 year‑old woman could expect, on average, seven extra years of annuity payments after getting back her original investment, and a 65‑year‑old man could expect five extra years of payments, the firm said.
Nick Flynn, retirement income director at Canada Life said: “The current macroeconomic environment means annuity rates remain at some of their highest in a decade. As a result, people are recouping their initial outlay significantly earlier than they would have done just five years ago.
“Attractive pricing and the certainty of a guaranteed income for life is increasingly valuable as people live longer and face extended retirements, making annuities a strong choice for those seeking financial stability and peace of mind.”
He said the inclusion of pensions in inheritance tax calculations from April 2027, is only serving to generate further interest in annuities.