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13 Jul 2020


2007 – a bumper year for annuities

The latest annuity market review by Investment Life and Pensions Moneyfacts shows that 2007 offered a welcome upturn in a sector that has suffered prolonged erosion in the level of annuity rates available to pensioners.

Average rates increased by up to 6% between January 2007 and the end of the year and although rates have dropped marginally over recent weeks, they still stand at their highest level for several years. The improved rates available will benefit pensioners retiring now, but the longer term outlook is less certain, with the potential influences of inflation and recession threatening to cast their shadow over both the long dated investments that drive annuities and the buying power of annuities already in payment.

The other key trend identified during 2007 and which looks set to continue this year is a growth in products offered by the enhanced annuity market. This sector has always underperformed with figures for enhanced annuities remaining stubbornly below the 10% mark, while the estimated potential market stands far off at 40%. A number of mainstream providers including LV=, Norwich Union and Legal & General have already entered the market with new or revamped propositions, while further additions are expected in the near future.

Suzanne Greener, Deputy Editor of Investment Life & Pensions Moneyfacts commented: “The increase in annuity rates over 2007 gives a significant boost to a market that has suffered substantial reductions in rates amounting to 30% over the previous decade. It’s vital that pensioners don’t fall into the trap of assuming that their existing pension provider will offer them the best deal. What’s more if the predicted boom in enhanced annuities is fulfilled, it will be essential for pensioners either to take time to find the best deal for themselves to suit their individual lifestyle and health circumstances or to take advantage of an adviser’s expertise. Less savvy annuitants could suffer badly, particularly if the withdrawal of impaired lives from the standard annuity pool leads to the conventional rates on offer taking a further dive.”


Average male rate

Year on year % change

Average female rate

Year on year % change

December 97





December 98





December 99





December 00





December 01





December 02





December 03





December 04





December 05





December 06





December 07





Change over 10 years





Based on an annuitant aged 60 buying a standard ‘level without guarantee’ annuity for a purchase price of £10K.

Source: Moneyfacts 14.2.08


Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry. 



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