Best annuity rates this month

Whether you are using all or just some of your pension to buy an annuity, it's vital that you shop around to get the best rate and declare any health problems that could make you eligible for a better deal.

Here, we compare the rates on annuities on offer in January 2019 for someone buying an annuity with a £50,000 lump sum. 

You can dowload a full spreadsheet of annuity rates this month here (clicking link will download an Excel spreadsheet). Moneywise Annuity Rates 02 01 2019.xlsx

Healthy 65-year-old

The best rate for a healthy and non-smoking 65-year-old seeking a level income on a £50,000 purchase is this month from Legal & General, which is paying £2,867 a year an increase of £15 a year on December's rate.

For the same policyholder, this time seeking an inflation-linked payment, the best rate is again from Legal & General, exchanging a £50,000 lump sum for an escalating income starting at £1,721 a year a more sizeable £30 a year more than the same time last month.

Less healthy 65-year-old

If our 65-year-old has some health problems, he or she could be eligible for an enhanced annuity. These deals pay a higher rate to people whose health or lifestyle means that they are likely to have a lower life expectancy.

Our quotes are based on an individual who is overweight and has had type two diabetes for 10 years, taking one tablet a day.

The best deal paying a level income is once again from Just Legal & General which is paying £2,981 a year, this is £21 a year less than what it was paying in December.

For individuals seeking an inflation-linked income, the best deal is still with Legal & General which is paying a starting rate of £1,798 a year - another drop, this time of £20 a year.

• Retirement planning for ill health

Older buyers

The older you are when you purchase an annuity, the higher the income you will get. Combined with the flexibility of the pension freedoms, more retirees are likely to buy annuities at older ages. However, the right option for you will depend on your circumstances.

The best rate for a healthy, non-smoking 70-year-old is £3,291 from Legal & General which is paying £28 a year more than it was in December.

For inflation-linked income the best deal is still from Legal & General with a starting rate of £2,119, an increase of £44 a year over the last month.

For 75-year-olds, Legal & General still tops the tables paying £3,872, £42 a year more than December.

For inflation-linked income, Aviva is knocked off top spot - by no surprises, Legal & General, paying £2,638, but this is £11 a year less than last month's best rate.

Older and less healthy

If you buy an annuity when you are older, there is also an increased chance of you having health problems, meaning you may be able to get a better rate than you would have done when you were younger.

A 70-year-old who is overweight with type 2 diabetes (as in the previous example) can get a level income of £3,510 from Legal & General,a small drop of £3 a year since December.

For inflation-linked buyers the best rate is still  from Legal & General. It is paying a starting rate of £2,283, £6 a year more than last month, making it the fourth consecutive month of rate reductions.

At age 75, the best level rate is from Legal & General with a rate of £4,325 - £25 more than last month.

For those requiring inflation-linked income, Legal & General once again leads the way at £3,004, an increase of £29 since December - making it the first company to top every category in the Moneywise annuity round up!

• Where next for annuity rates?

Shop around

These quotes, provided for Moneywise by JLT Pension Decision on 2nd January are based on a lump sum of £50,000, are on a single life basis and include no guarantees.

Whatever your circumstances, it is essential to shop around for the best rate - just because one company pays the best rate at 65 it doesn’t mean it will still do so at 67. As our quotes show, health problems may make you eligible for a higher rate. So always be up front about your health, weight, smoking and drinking habits as well as any illnesses you may suffer from or medication you take.

If you are married or have someone that depends upon you for money, you may wish to choose a joint life policy that will pay an income to your partner if you die first or opt for a plan with a guarantee. These plans guarantee to pay an income for a fixed period of time irrespective of when you die. Guarantees of up to 30 years are available.

All of these elements do reduce the income you receive. However, they can provide vital security for loved ones.

• How to buy the right annuity for you