Average annuity rates for a healthy 65-year-old have increased by around 2.5% since January, according to the latest Standard Life Annuity Rate Tracker.

The increase has added £3,360 and £3,720 to the total lifetime income expected for a healthy 65-year-old man and woman respectively.

It means that a 65-year-old considering taking out an annuity could expect to receive an annual income of £6,980 based on a £100,000 pension pot, an increase of £170 compared to the start of the year.

While annuity rates have increased overall since the start of the year, the last quarter saw a slight dip, with the rates for a healthy 60-year-old and 65-year-old falling by 1.75% and 1.48% respectively, and for a healthy 70-year old by 1.30%. 

However, with small fluctuations expected, annuity rates remain steady overall and continue to provide benefit of income certainty in retirement, something which 9 in 10 people say is important to them.  

The Tracker 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.

According to the Tracker, a healthy 65-year-old male who bought an annuity in September at a rate of 6.98% could expect a total lifetime income of £140,270. For a female of the same age, the expected income was £155,630.

Meanwhile, a healthy 70-year-old who bought an annuity in September, could expect a rate of 7.81%. For a man, this would provide a total lifetime income of £124,200, while a woman could expect to receive £139,820. 

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

Pete Cowell, head of annuities at Standard Life, part of Phoenix Group, said: “The tracker shows that annuity rates remain steady and continue to provide the security and certainty people are looking for in retirement. This is certainly reflected in wider industry data, with a 38% increase in annuity sales from 2022/23 to 2023/24, demonstrating the increasing recognition on the valuable role annuities can play in providing guaranteed income.”