Annuity rates vary between providers. In the latest survey of our members' annuity rates (November 2014), a 65-year old buying an annuity with £24,000 from their pension, could receive between £840 and £2,100 a year in income, depending on their age, type of annuity, personal circumstances and the provider.
The main factors affecting annuity rates overall are the economy, especially interest rates, and how long the annuity provider expects their customers to live.
A customer's income from an annuity can also vary according to the following factors that vary from person to person:
- The size of your pension pot. Some providers offer better rates for people who can invest large amounts
- Your age. If you retire earlier, your pension will need to pay out for longer which means your income will be less each year
- What type of annuity you buy. For example, whether it provides an income for you or for dependants as well; and whether it increases with inflation or stays level. This is an important decision for you to make.
- Your health. Lifestyle factors such as whether you smoke can affect the rate of annual income you will receive. For example, people in poorer health may benefit from an enhanced annuity
- Where you live. Providers may use figures on mortality rates linked in your postcode area to determine the level of annuity payments you will receive
A guaranteed annuity rate could be very valuable, and you should check with your provider whether your pension policy has one. Some providers also offer higher annuity rates to customers who have saved into a pension with them.