Average annuity rates climbed to 7.25% for a 65-year-old in September, up from 7.11% in June, according to the Standard Life Annuity Rate Tracker.

It means an extra £2,600-£2,900 could be added to the total expected lifetime income for a 65-year-old man and woman when compared to the second quarter.

The modest increase means that a 65-year-old looking to annuitise in recent weeks could expect to receive an annual income of £7,248 based on a £100,000 pension pot.

Pete Cowell, head of annuities at Standard Life, said: “While early indications for the final quarter of the year suggest that rates have fallen back a little, what’s important to note is that they continue to remain well above the historic low levels seen previously.”

The Tracker, developed by Standard Life, part of Phoenix Group, monitors current average annuity rates across the market for those annuitising at ages 60, 65, and 70. It also shows the total lifetime income from an annuity and the extent to which annuity rates improve with age.

Based on rates at the end of October 2023, the Tracker shows a 25% difference in annuity rates based on someone who chooses to annuitise at 60 versus 70. An individual purchasing an annuity at the age of 60 could expect to receive an annual income of £6,525, £7,248 at 65 and £8,178 at 70.

The Tracker found that the total expected lifetime income for the average female who bought an annuity at 65 had increased from £158,660 in June 2023 to £161,623 in September 2023 – a difference of more than £2,900. The equivalent figure for a male was £142,296 to £144,953 – a difference of more than £2,500. Total expected income is based on life expectancies from ONS.

*Total expected income figure based on life expectancy statistics from the Office of National Statistics, are based on age annuity is first purchased. Total expected income includes annuity income only.