{"id":353738,"date":"2026-01-05T18:17:09","date_gmt":"2026-01-05T18:17:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/353738\/"},"modified":"2026-01-05T18:17:09","modified_gmt":"2026-01-05T18:17:09","slug":"pension-annuities-set-for-comeback-amid-rule-changes","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/353738\/","title":{"rendered":"Pension annuities set for comeback amid rule changes"},"content":{"rendered":"

Annuities are expected to regain prominence in 2026 as pension reforms begin to alter how people draw income in retirement, according to industry figures.<\/p>\n

The anticipated shift follows changes announced in November\u2019s Budget and further reforms due to take effect from 2027.<\/p>\n

Adrian Murphy, chief executive officer at Murphy Wealth, said the inclusion of pensions within estates for inheritance tax purposes is likely to change long-standing retirement strategies.<\/p>\n

He said: “The forthcoming changes that will bring pensions into estates are going to fundamentally change the way people take income in retirement.<\/p>\n

“Pensions have gone from the last place to take money from to among the first.”<\/p>\n

The renewed interest in annuities comes after a prolonged period during which they were less commonly used by retirees.<\/p>\n

Annuities provide a guaranteed income for life in exchange for a pension lump sum.<\/p>\n

They are typically used by retirees who want certainty over their future income and have clearly defined financial needs.<\/p>\n

Higher Government bond yields have contributed to improved annuity rates over the past three years.<\/p>\n

Because annuity pricing is closely linked to long-dated Government bond yields, rising yields have increased the income available from these products.<\/p>\n

\"Pensioner\"\/<\/p>\n

The reforms represent a significant change in how pensions are viewed within financial planning<\/p>\n

| GETTY<\/p>\n

Industry data shows that rates available at the end of 2025 were significantly higher than those seen in the previous decade.<\/p>\n

Figures from Fidelity Wealth Management in December 2025 showed that a 66-year-old in good health, with a \u00a3300,000 pension pot could secure an annual income of \u00a322,447 by purchasing an annuity.<\/p>\n

That equates to a rate of around 7.5 per cent for a single-life annuity paying a fixed income with no inflation protection.<\/p>\n

The same pension pot would have generated a much lower income in earlier years.<\/p>\n

Around five years ago, annuity rates typically ranged between four per cent and five per cent.<\/p>\n

At those levels, a \u00a3300,000 pension pot would have delivered an annual income of about \u00a313,500.<\/p>\n

\"Pensioner\"\/<\/p>\n

Annuity returns were depressed for much of the past two decades<\/p>\n

| GETTY<\/p>\n

Rates began to recover after 2022 as interest rates increased and gilt yields rose despite the improved income on offer.<\/p>\n

Mr Murphy said the inability to pass on an annuity to beneficiaries can be a key consideration.<\/p>\n

“The main catch is you cannot pass them on to your family, which may make it self-defeating for those with inheritance in mind.”<\/p>\n

In most cases, income payments stop when the policyholder dies, which means any remaining value is not transferred to family members unless specific options are added at the outset.<\/p>\n

As a result, annuities are often used only in particular circumstances.<\/p>\n

They may be less suitable for individuals whose priority is preserving wealth for beneficiaries.<\/p>\n

Mr Murphy said decisions around annuities should consider how an annuity fits with their wider retirement and estate planning arrangements.<\/p>\n

Looking ahead, annuity rates may be affected by changes in interest rate expectations during 2026.<\/p>\n

Market forecasts published in early December suggested the Bank of England could reduce the base rate over the course of the year.<\/p>\n

Consensus expectations indicated rates could fall from fou per cent to around 3.25 per cent by the end of 2026.<\/p>\n

\"UK<\/p>\n

Gilt prices as of Jan 5, 2026 at 3:12pm<\/p>\n

| <\/p>\n

MarketWatch<\/p>\n

Because annuity rates are influenced by long-dated government bond yields, any sustained fall in yields could reduce the income available from new annuity purchases.<\/p>\n

Lower gilt yields would typically lead to lower annuity rates.<\/p>\n

Industry analysts said this could alter the relative attractiveness of annuities compared with other retirement income options.<\/p>\n

The outlook for annuities will therefore depend on how interest rates and bond markets develop over the coming year.<\/p>\n

The combination of pension tax changes and shifting market conditions is expected to play a central role in shaping retirement income decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"Annuities are expected to regain prominence in 2026 as pension reforms begin to alter how people draw income…\n","protected":false},"author":2,"featured_media":310530,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,814,2222,4178,4174,4175,56,54,55],"class_list":{"0":"post-353738","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-interest-rates","11":"tag-money","12":"tag-pensions","13":"tag-personal-finance","14":"tag-personalfinance","15":"tag-uk","16":"tag-united-kingdom","17":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/353738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=353738"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/353738\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/310530"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=353738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=353738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=353738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}