How are annuity rates calculated?
When you hand over your pension pot to a provider, they usually invest that money in long-term government bonds, typically a 15 year gilt. The return they can offer you depends on the interest rate, or yield, on that bond.
Life expectancy is also an important factor. As people live longer, providers expect to pay more out, therefore lowering the income that retirees can get.
The importance of shopping around
It’s important that you compare rates to secure the highest lifetime income possible – in some cases as much as 27% more income.* You only get one chance to do this; once you have bought an annuity and have started to receive your income, you can’t change your mind.
At Key we can help you to find a better annuity rate by searching the market for you, so you don't have to.
*Based on Key's average customer 2017 - Male, Married, aged 66, history of heart attack, diabetes, high blood pressure and a smoker, fund value £51,754. It depends on your individual circumstances if you are able to achieve these increases above.