Retirees could become “hundreds of pounds better off” amid possibility of rising annuity rates, reveals Finance Expert

It comes as gilt yields – a major factor behind annuity rates – have soared due to conflict in the Middle East.

Pensioners worried about the impact of recent stock market volatility on their retirement pot may feel tempted to purchase an annuity – and the prospect of rising rates could add to their appeal.

Over the past year alone, annual annuity income has gone up by £60 on average (from £3,498 in March 2025 to £3,558 by the start of this month). But, with gilt yields (a major factor behind annuity rates) having risen in response to the ongoing war in Iran, it could be this income continues to grow.

“Ten-year gilts have been rising over the past few weeks, hovering around the 5% mark. Rising gilt yields have been known to cause annuity rates to soar. If this comes to fruition, it could mean retirees become hundreds of pounds better off,” said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

“During 2022, annuity rates shot up amid interest rate volatility and stock market uncertainty, so much so, that someone who took annuity income in December 2022 versus the start of that year was around £900 per year better off on average,” she explained.

Is now a good time to buy an annuity?

Annuities are becoming an increasingly popular choice among retirees, with the Association of British Insurers (ABI) revealing there was a 10% increase in sales for escalating annuities during 2025 (compared to 2024).

But, while Springall recognised that many may be focused on “protecting their current pension arrangements” amid the ongoing uncertainty, she said that retirees may also want to “adopt a ‘wait and see’ stance” as providers review their pension annuity rates over the coming weeks.

“Seeking advice before making any rushed decisions is wise [as] no one knows how long the unrest will last,” said Springall.

“Circumstances can change, such as a deterioration of health or a change in someone’s risk preferences, so an annuity may be a suitable option to provide a guaranteed income during retirement. Those who may want a bit of flexibility could also choose part annuity and drawdown,” she added.