Annuity rates are now at a maximum of two years, having improved 12% since January and 6% in the third quarter of the year, according to MGM advantage annuities index.
The 6% quarterly increase was the largest of its kind since the index launched in August 2009.
It means the average income today would pay 11% more in income compared to the equivalent available a year ago, or £ 6,111 in additional income over the course of someone's retirement (based on a pot of £ 50,000 purchased by someone aged 65).
The difference between the higher rate best and worst standard annuity annuity is about 38%, "meaning many people with medical conditions or lifestyle might be missing out on thousands of pounds of income," according to MGM.
While up to 70% of people upon retirement may qualify for a better rate because of a health condition or lifestyle, MGM has found that only 6% of consumers who bought an annuity in the second quarter of the year, without the Council bought a higher pension. This compares to 45% when advice is provided or people who bought.
Aston Goodey's at the company said: "annuity rates had a very bumpy path, but we have seen a steady improvement this year with rates hitting a two-year high, largely driven by the returns available on bonds and gilts. This is great news for people looking to build a retirement income, even though it always pays to shop around for the right shape not only of income, but also the highest rate.
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However, he added: "the increases we've seen this year must be viewed against the 2012 record minimum and the general trend of a decline in rates. The pressure on rates continue to cause SolvencyII, improve longevity and low yields on gilts and bonds, which will dampen job growth down a recovery of short-term rates ".
The colloquial name given to securities issued by the British Government and published to raise funds to fill the gap between what the Government spends and what it receives in revenue. In 1997, the entire stock of outstanding gilts was £ 275bn; from October 2010 it had passed £ 1, 000bn. Gilts are issued throughout the year the Office of debt management and are essentially the investment bonds backed by HM Treasury and customs & considered a very safe investment because the British Government has never defaulted on its debt, and this is reflected in the rating AAA United Kingdom for his debt. Gilts work similarly to the bonds and are another variation of fixed-income securities.
In Exchange for any lump sum – usually the pension fund – an annuity is "bought" by an insurance company and provides an income for life. When you die, income stops. Annuity rates vary and depend on your daily sex (although by December 21, 2012 insurers won't be able to use sex as a factor in the calculation of annuities), age, health and a number of other factors, so you have to choose the right one and, once bought, its terms cannot be altered, and then seek financial advice.
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