Research by MGM Advantage has revealed that annuity rates increased by a record 6% during the third quarter of 2013, the largest quarterly increase since the Index began in August 2009.
This has helped give rates an overall increase of 12% since January this year, meaning they've managed to hit a two-year high.
The figures also reveal the stark contrast between the best-performing enhanced annuity rates and the worst-performing standard rates, with the difference being as much as 38%.
Around 70% of people at retirement age could benefit from an enhanced annuity yet only 6% of consumers who directly purchased an annuity in Q2 chose an enhanced option, meaning a lot of people with a health or lifestyle condition are potentially missing out on thousands of pounds of income.
The boost in rates is largely the result of rising returns available on bonds and gilts, helping people generate a decent retirement income. Aston Goody at MGM Advantage is encouraged by the figures but urges people to shop around to find the best rate, with the low uptake of enhanced annuities indicating that more needs to be done to "ensure customers get the right deal for their individual circumstances."
Richard Eagling, Editor of Investment Life & Pensions Moneyfacts, commented on the news:
"A combination of rising gilt yields plus a return to a more competitive pricing environment has seen annuity rates rise for the third consecutive quarter. However, with gilt yields still volatile it remains uncertain whether this upturn in annuity rates will continue."
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