Annuities

An annuity is a product that turns an individual’s pension savings into an income for life, and there are predictions that many more people will now be looking at using some of their retirement cash to buy one. New figures show annuity rates have leapt by 44 percent in the space of a year and are now at their highest levels since early 2009.Data from Hargreaves Lansdown’s annuity quote service shows a 65-year-old with £100,000 able to get an annuity income of £7,532 per year. This is a whopping 45 percent increase on the £5,208 best-buy income from October 2021.An interest rate hike this week could further stimulate the market and annuity incomes could be on the rise again.On his YouTube channel, financial planner Chris Bourne explained how people can take advantage of the rise in rates and get the guaranteed income of a pension annuity without losing the flexible access and death benefits of drawdown.He stated that there a ‘great possibilities,’ for people who opt for fixed-term annuities that can give the best of both worlds.READ MORE: Make a ‘significant difference’ to your retirement – expert shares ‘best place’ for cash Annuity rates have soared over 40% (Image: GETTY)Fixed-term annuities allow people to get a guaranteed income for a certain time period between three and 25 years, without having to tie someone into the same annuity rate for the rest of their lives.He explained that they allow people to choose a guaranteed maturity value at the end of the fixed term which allows them to re-purchase the fixed-term plan or a lifetime plan, take it as a lump sum payment, or transfer it to another pension scheme ie go back into drawdown.Mr Bourne said: ‘What this means is you can access all the security of an annuity for a period of time.’You can know for certain how much money you can get on a certain basis, what amount of money it’s going to be worth at the end, and you don’t have to lose control of your benefits.DON’T MISS’It’s so worth it’: Mum shares popular side hustle that earns more than her full time job [EXCLUSIVE]4 inheritance tax pitfalls that can lead to ‘significant IHT issues’ – avoid ‘double tax’ [INSIGHT]Dave Ramsey explains how man, 66, with £26,000 can retire ‘basically a millionaire’ [VIDEO] As the cost of living crisis continues, any extra cash could be vital for families on low incomes (Image: EXPRESS)Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: ‘After months of rising yields annuity rates have cooled slightly in recent days.’The appointment of Rishi Sunak as prime minister has brought an element of calm following the bond market meltdown triggered by the Truss government’s mini-budget.’The announcement caused chaos for investors but proved a boon for annuities as surging gilt yields pushed incomes ever higher.’The revival in incomes could prompt people currently in income drawdown to take a closer look at what annuities can offer but it’s important to use a service that looks industry-wide to get the best quotes.’Annuity providers will usually guarantee their quotes for a certain period so even if annuity rates move down you may well still qualify for the higher income – it’s worth checking guarantee periods when you get a quote.’More videos are availavble on the Chris Bourne – Tax Free Investing Expert Youtube channel.