Average annuity rates have a hit a 14-year high and have increased by 52% in the past nine months, according to new data.

The rise continues a surge this year in annuity rates which have been in the doldrums for many years.

Data from Canada Life suggests that the break-even point when annuity buyers would receive their original pension back through income, has fallen by seven years from 22 years to 15 years.

A benchmark annuity of £100,000 at age 65 would now pay a guaranteed income of £6,873 a year compared to £4,521 at the start of 2022.

Inflation-linked annuity rates have also risen and are up 77% over the past nine months. A benchmark £100,000 annuity linked to RPI will now pay a starting income of £3,896, compared to £2,195 at the start of the year.

Nick Flynn, retirement income director, Canada Life, said: “It’s has been a record-breaking year for annuity rates, with incomes at a level we haven’t seen for over a decade. I’d need to look back to before the banking crisis of 2008/9 to see annuity rates at a similar level as today.

“In the current economic climate, where else could you receive nigh on 7% risk free income in retirement? That is how strong annuity rates are right now which is why they are worth more than just a second glance.

“With the right guarantees and value protection options, annuities can now give drawdown a good run for their money through the benefits available. Clients planning their retirements or looking to de-risk their investment portfolios should take another look at annuities.”

Mr Flynn said clients could now consider using annuities alongside drawdown and that phased annuity purchase throughout retirement could be a strategy to explore. 

• Source: Canada Life annuity rates as at 30.9.2022. Benchmark annuity rates for £100,000 at age 65. 10-year guarantee, single life, no escalation.