Annuity rates have soared in 2022 as gilt yields rose and competitors vied for market position.

Average benchmark annuity rates have risen 44% since January and reached a 14-year high in October, according to Canada Life.

A 30-year guarantee would now pay £59,940 additional income (on a £100,000 initial purchase price) compared to rates at the beginning of the year.

Nick Flynn, retirement income director at Canada Life, said: “Annuities have made quite a comeback this year, with guaranteed lifetime income back in vogue following the strong improvement in rates. This has largely been driven by the positive shift in yields available on gilts, while competitors have also vied for market position.

“Annuities can play a vital role in any holistic retirement plan and yet many preconceptions continue to reinforce the misunderstanding around annuities. From the positives of longer guarantee periods, to 100% value protection, or the benefits of disclosure providing enhanced rates, annuities are worth more than a cursory second glance.”

The average annual annuity income has rise by £898 since the start of the year, standing at £3,190 in December, according to data from Moneyfacts.

Income peaked in October, where on both the 17th and 24th, the average yearly income stood at £3,389, reducing at the start of November to £3,376, and edging down to £3,190 for December.

The Moneyfacts annuity figures are based on a buyer aged 65 buying a single life level without guarantee annuity for a £50,000 price.

Rachel Springall, finance expert at Moneyfacts, said: “This year has been turbulent for many, with interest rate uncertainty, stock market volatility and a cost of living crisis hitting consumers from every direction. Those looking to retire may be surprised to find annuity rates have improved, so those who decide to annuitise could be hundreds of pounds better off than if they retired at the start of 2022.

“Despite an improvement to the average annual annuity income, retirees may well opt for drawdown due to the flexibility. Those who remained fully invested in a pension would likely note the impact made on pots during the stock market volatility in 2022.

“As is ever the case, consumers would be wise to go over their retirement options with an independent adviser. Should someone’s circumstances change, whether due to a deterioration of health or a change in attitude to risk, an annuity may be a suitable choice providing a guaranteed income during retirement, but this would depend on future annuity rate pricing. Indeed, choosing part annuity and drawdown may suit those who desire a bit of flexibility but also a set income that a lifetime annuity can offer.”