The average annual annuity income has risen by £106 since March, according to personal finance data firm Moneyfacts.
Annual annuity income now stands at £3,653, up from £3,547 at the start of March 2026, based on a £50,000 purchase price.
Rises in annuity rates have been driven by increasing long-term gilt yields, spurred by conflict in the Middle East and political instability.
The popularity of annuities could continue to rise, with unused pension pots falling under inheritance tax liabilities from April 2027, says Moneyfacts. Joint life annuities can continue to make payments to a beneficiary after the death of the annuitant. If correctly set up, these payments can be made free of inheritance tax.
According to The Association of British Insurers, the total value of premiums paid into individual pension annuities grew 4% to £7.4bn in 2025, the highest annual level since Pension Freedoms were announced in 2014.
Annuity rates reached an 18-year high of 7.75% last month, according to the Standard Life Annuity Rate Tracker.
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The rise means a healthy 65-year-old with a £100,000 pension pot could expect to receive up to £7,750 per annum, compared to £7,660 in April. That could work out to an extra £2,060 over the course of retirement.
The payback period for a £100,000 annuity purchase with a rate of around 5% in 2020 would have taken around 20 years to repay. However, with today’s rates closer to 7.75%, that falls to around 13 years, depending on individual circumstances.
According to the Tracker, a healthy 65-year-old male who bought an annuity in July 2026 at a rate of 7.75% could expect a total lifetime income of £156,000. For a female of the same age, the expected income was £177,000.
Meanwhile, a healthy 70-year-old who bought an annuity during the same period could expect a rate of 8.43%. For a man, this would provide a total lifetime income of £135,000 while a woman could expect to receive £155,000.