A 65-year-old using a £50,000 pension pot to buy a standard single-life level annuity can now secure an average annual income of £3,653, up £106 from early March. According to analysis from Moneyfactscompare.co.uk, the same pot produced £3,547 a year at the beginning of March, marking an increase in the guaranteed income available over less than six months.
The change comes as long-term UK government bond yields remain elevated and as pension savers prepare for inheritance tax rules due in April 2027. Insurers use gilt yields when pricing annuities, so the recent level of government borrowing costs has fed through into the income offered to people exchanging part of a pension fund for payments for life.
Higher Gilt Yields Lift Guaranteed Retirement Income
Moneyfactscompare.co.uk found that the average annual income from a £50,000 pot had risen from £3,547 in March 2026 to £3,653 in August 2026. For a £100,000 pension fund, the equivalent income is around £7,306 a year, compared with about £7,094 in March, an annual increase of roughly £212 under the same average rate.
The calculations are based on a 65-year-old buying a standard single-life level annuity with no guarantee period. They do not cover alternatives such as inflation-linked products, joint-life annuities that continue paying a surviving spouse or partner, or enhanced annuities available to some people with health conditions.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, linked the movement in rates to long-term gilt yields. According to Springall, ten-year gilts breached 5% on several occasions during 2026 and remained above their level at the start of the year, amid prolonged conflict in the Middle East and political unrest.
Inheritance Tax Plans Reshape the Annuity Debate
The rise in annuity income also precedes a planned change to the treatment of unused pension funds. From April 2027, most unused pension pots are set to become subject to inheritance tax under government plans. Financial experts believe the change could lead more retirees to consider using part of their pension to secure a guaranteed income rather than leaving the money invested.
The annuity market has already recorded its strongest annual inflow since the pension freedoms were announced in 2014. According to the Association of British Insurers, £7.4 billion was paid into individual pension annuities during 2025, an increase of 4% from the previous year and the highest annual total across that period.
Springall said people planning to buy an annuity may welcome the rise in rates, while warning that further volatility in long-term gilts was plausible, particularly around the autumn Budget. She also said the April 2027 inheritance tax change could make annuities increasingly attractive, but stressed that buyers should seek professional advice before committing because the decision is usually irreversible.
The choice depends on the form of income required. Level, inflation-linked, enhanced and joint-life annuities provide different benefits, and the supplied figures apply only to the standard single-life level product used in the Moneyfactscompare.co.uk comparison.
