Standard Life says annuity rates have reached their highest level in 18 years for pension savers

Annuity rates have reached their highest level in 18 years, allowing retirees to secure larger guaranteed incomes from their private pension savings.

New figures from Standard Life's latest annuity tracker, based on July 2026 data, show someone aged 70 or over with a £100,000 private pension pot can now secure an annual guaranteed income of £8,433, equivalent to an annuity rate of 8.43 per cent.

The income would be paid in addition to any state pension a retiree is entitled to receive.

For people aged 65 and over, the average annuity rate now stands at 7.75 per cent, which Standard Life said is the highest level recorded since August 2008.

The figures are based on average market rates for a £100,000 pension pot before tax.

An annuity is a financial product that allows someone to exchange some or all of their private pension savings for a guaranteed income that is typically paid for the rest of their life.

The money used to buy an annuity usually comes from a workplace pension or a personal pension built up through individual contributions.

Life insurance company LV said people "must be at least 55 years old and have at least £2,000 to invest after you've taken any tax-free cash" to purchase one of its annuities.

The level of income offered depends on several factors, including a person's age, health, lifestyle and the size of their pension pot.

Pete Cowell, head of annuities at Standard Life, said: "Annuity rates have reached 7.75 per cent [for over 65s], the highest rates since August 2008, underlining just how much the retirement income landscape has shifted in recent years."

He added: "The payback period for a £100,000 annuity purchase with a rate of around five per cent in 2020 would have taken around 20 years to repay. However, with today's rates closer to 7.75 per cent, that falls to around 13 years, depending on individual circumstances."

Standard Life's analysis also estimated the total income retirees could receive over their lifetime after purchasing an annuity.

A healthy man aged 65 buying an annuity in July 2026 could expect to receive around £156,000 over his lifetime, while a healthy woman of the same age could receive around £177,000.

Among healthy 70-year-olds purchasing an annuity at the current average rate of 8.43 per cent, men could receive around £135,000 over their lifetime, while women could receive approximately £155,000.

Although higher annuity rates have increased the level of guaranteed retirement income available, there are several factors prospective buyers should consider before making a purchase.

Annuity payments count as taxable income and may affect the amount of income tax paid, as well as eligibility for some means-tested benefits.

Buying an annuity is also generally irreversible, meaning it cannot usually be cashed in or changed after it has been purchased.

Those who die earlier than expected could receive less in total payments than the amount originally used to buy the annuity.

LV advises customers to disclose any existing medical conditions because they may qualify for an enhanced annuity, which could provide a higher guaranteed income.

Standard Life and LV both recommend that anyone considering buying an annuity should seek professional financial advice before making a decision.