Market unrest adds over £100 to annual annuity income since March

Could rising annuity rates make this retirement product even more appealing to pensioners?

Since March, the average annual annuity income has increased by £106 to reach £3,653 (as of 3 August 2026), analysis by Moneyfactscompare.co.uk revealed*.

This growth has largely been driven by the unrest in the Middle East and political uncertainty, which have caused long-term gilt yields (which influence annuity rate prices) to rise over recent months.

Indeed, 10-year gilts have soared above 5% multiple times during 2026 and are higher than they were at the start of the year.

“Pensioners planning to lock into an annuity may be delighted to find rates have been increasing, leading to the average annual income rising by over £100 in less than six months,” Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, commented.

Will annuities become more popular?

An annuity can be an attractive option for those who want a guaranteed income instead of relying on a pension income that can fluctuate, depending on stock market performance. And, with annuity rates rising, retirees could get an even greater return on their pension pot.

Annuities have proved popular recently, with the Association of British Insurers (ABI) revealing that the total value of premiums paid into individual pension annuities increased by 4% in 2025 to £7.4 billion. Moreover, there was an 8% rise in the number of people aged 70 and over buying an annuity, indicating that a stable income is an important priority for those in later life.

Springall points out that annuities may also be “due a resurgence in popularity over the coming years” as, from April 2027, unused pension pots will be subject to inheritance tax.

Because of this, purchasing an annuity could be an effective strategy to reduce the overall value of an estate, as well as a way to ensure a regular income in retirement. However, before making any decisions about their pension pots, Springall urges retirees to get advice to understand the longer-term impact on their retirement income, and to help them work out “whether an annuity is an appropriate choice, or if they should consider an alternative guaranteed fixed term income plan”.

Choosing the right retirement plan

While annuities can be beneficial, they may not be right for everyone. Moreover, with different types of annuities to choose from, it’s important to research the available options and get advice to see which one may be suitable for your unique circumstances and preferences.

For example, a fixed annuity pays a set income each year, while “increasing” or “escalating” annuities pay a higher income each year, in line with inflation or a certain percentage, for example.

Meanwhile, “joint-life” annuities continue to pay out an income to dependents after the annuitant dies.

It’s also worth remembering you could choose a blended approach and combine multiple strategies, such as purchasing an annuity with some of your pension pot and keeping the rest invested. This could provide you with the reassurance of a stable income, while also ensuring you don’t miss out on any potential investment gains (remembering that investments aren’t guaranteed to increase in value).

The choice can be overwhelming, which is why getting advice on how best to use your pension to fund your retirement lifestyle is crucial.

“Sometimes it can be difficult to have wider conversations about later life, but it is really important to understand retirement options and estate planning for peace of mind,” Springall urged.

_{* Annuity figures based on an annuitant aged 65 buying a standard single life level without guarantee annuity for a £50,000 purchase price.}