The average annuity rate has improved by 10.6% since the market low in August, according to analysis from Retirement Advantage.
The retirement specialist attributed the rate hike to providers reacting to improving gilt yields and market competition. A £50,000 annuity would now fetch a lifetime income of £2,591 per year compared to August's market low of £2,343 - an improvement of £5,208 of total income over a typical retirement. The difference between the worst standard and the best enhanced annuity is currently 26%.
The analysis was based on data supplied by Investment Life and Pensions Moneyfacts and looked at level annuities without a guarantee and a purchase price of £50,000 at 65 years of age.
Retirement Advantage pensions technical director Andrew Tully (pictured) said: "Annuity rates were hit hard by falling gilt yields in the immediate aftermath of the vote to leave the EU. Fortunately gilt yields are on the way up again. Providers are also pricing to attract business, and these two factors have combined to push annuity rates back up to pre-referendum levels."
Tully suggested the continuing pressure on rates was a result of people living longer, although there was evidence this trend was slowing. "While we all come to terms with Brexit and the change in US presidency, yields on gilts are likely to be volatile," he added.
"There is light at the end of the tunnel in the form of clarity around insurers' capital positions from Solvency II, while competition in the market is also likely to help rates. But this all combines to make the outlook for rates uncertain."
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