Over-65s purchasing annuities are now £106 a year better off than they were at the start of March, as Andy Burnham's premiership gets underway. The Labour Prime Minister has made easing the cost-of-living pressure on older households a central priority, promising to shield state pensioners from tax if they rely solely on Department for Work and Pensions (DWP) payments.
Annuity Incomes Rise Sharply
According to data from Moneyfactscompare, a 65-year-old with a £50,000 pension pot can now secure an average annual income of £3,653 from a standard single-life level annuity. That represents a £106 increase compared with the beginning of March, offering a meaningful boost to retirees who choose to lock in a guaranteed income.
The rise is directly linked to movements in gilt yields, which have been climbing in recent months. Rachel Springall, finance expert at Moneyfactscompare.co.uk, explained that long-term gilt yields are a key driver of annuity rate pricing. "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," she said.
Burnham's Spending Flexibility Fuels Gilt Movement
Andy Burnham, the MP for Makerfield, has had a direct impact on this trend. In late July, gilt yields rose after he announced he would seek "flexibility" within existing rules on government spending. This move signalled a potential shift in fiscal policy, which markets responded to by pushing up yields on long-term government debt.
Ms Springall noted that the rise is not solely down to domestic politics. "Long-term gilt yields have been rising due to prolonged conflict in the Middle East and political unrest," she said. "Ten-year gilts have breached 5% on a few occasions during 2026 and remain higher than the start of the year."
Volatility Expected Ahead of Autumn Budget
Looking ahead, Ms Springall cautioned that further volatility in long-term gilts is entirely plausible, particularly with the Autumn Budget looming on October 28, 2026. Bond fund managers have reportedly welcomed the appointment of John Healey as Chancellor, but markets are braced for potential turbulence in the run-up to the fiscal statement.
For pensioners, the current environment presents an opportunity. With annuity rates on the rise, those considering converting their pension pot into a guaranteed income may find this an advantageous moment to act. However, the potential for rates to climb further or fall back means timing remains a personal decision, and financial advice is often recommended.
Triple Lock and Tax Promise Underline Support
Beyond annuities, Mr Burnham has committed to maintaining the triple lock on state pensions, ensuring payments rise in line with inflation, wages, or 2.5%, whichever is highest. His pledge to shield state pensioners from tax on DWP payments alone is another measure aimed at protecting older households from the cost-of-living crisis.
These policies, combined with the annuity market's recent gains, mean over-65s are seeing tangible financial improvements in the early months of the new premiership. As the Autumn Budget approaches, pensioners and investors alike will be watching closely for any further shifts in fiscal policy that could affect their incomes.
