Retirees have been handed an unexpected £100 pension income boost, but experts are urging caution before making any irreversible decisions. Analysis from Moneyfactscompare.co.uk reveals that average annual annuity income has climbed by more than £100 since March 2026, driven by rising long-term gilt yields amid global market unrest.
The typical annual income from a £50,000 annuity purchase now stands at £3,653, up from £3,547 at the start of March 2026 – an increase of £106 in less than six months. This uplift comes as 10-year gilt yields have repeatedly breached the 5% mark during 2026, fuelled by prolonged conflict in the Middle East and political uncertainty.
Annuity popularity on the rise
The Association of British Insurers (ABI) reports that total premiums paid into individual pension annuities grew by 4% to £7.4 billion in 2025 – the highest annual level since pension freedoms were introduced in 2014. This suggests annuities are already regaining favour among savers, a trend that could accelerate as new inheritance tax rules approach.
From April 2027, unused pension pots will become subject to inheritance tax, prompting many retirees to consider annuities as a way to reduce the overall value of their estate. However, financial experts warn that locking into an annuity is usually a permanent decision that should not be taken lightly.
Expert advice: don't rush
Rachel Springall, finance expert at Moneyfactscompare.co.uk, acknowledged the positive news but stressed the need for careful planning. “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.
“Long-term gilt yields impact annuity rate pricing, and in recent months they have been rising due to prolonged conflict in the Middle East and political unrest. Ten-year gilts have breached 5% on a few occasions during 2026 and remain higher than the start of the year. It is entirely plausible for further volatility to long-term gilts, particularly surrounding the Autumn Budget.”
Consider all options
Springall added: “Annuities are due a resurgence in popularity over the coming years as they can be a way to reduce the overall value of an estate, with unused pension pots subject to tax on inheritance from April 2027. Retirees releasing funds out of their pension pots must get good advice to understand the longer-term impact on their retirement income, and whether an annuity is an appropriate choice, or if they should consider an alternative guaranteed fixed-term income plan.”
There are various annuity options available, including those linked to inflation or rising by a set percentage. Applicants in poor health might qualify for enhanced annuities, which offer higher payouts. Setting up the annuity correctly is vital, such as choosing a joint life annuity to continue payments to a beneficiary after death.
Planning for peace of mind
“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 concluded. As the April 2027 inheritance tax changes approach, financial advisers expect more retirees to seek guidance on whether annuities fit into their broader retirement strategy, rather than reacting to short-term market movements.
