The sustained upturn in annuity rates may be one of the few rays of sunshine to burst through the credit crunch gloom, according to recent research.

Research from Investment Life & Pensions Moneyfacts revealed that, although annuities faltered slightly during the first three months of 2008, average rates have bounced back to stand just above those offered in December last year.

The annuity market review carried out in December 2007 showed that despite plunging returns of up to 30 per cent during the previous decade, average annuity rates had improved by 6 per cent during 2007 taking rates to their highest level in five years.

The number of rate changes during the past few weeks suggests that providers are keen to pass improvements onto annuity customers in a competitive market.

Despite this good news, anyone planning to buy an annuity should resist complacency and ensure that they shop around to get the best deal for their personal circumstances.

Following the Treasury-led review into the open-market option, the FSA has expressed its disappointment in the quality of marketing literature sent out to customers who are about to buy an annuity and the continuing disparity between the best and worst rates available.

Although annuity rates have recently enjoyed a period of relative growth and stability compared with the previous decade, customers can still get caught out if they fail to do their homework.

Differences between the best and worst standard rates on offer can vary by as much as 20 per cent and enhancements available due to ill health can significantly increase the income payable. With men now expected to live on average almost seventeen years after the age of 65 and women close to twenty years, getting the best deal can amount to a considerable improvement in income and lifestyle.

Suzanne Greener, deputy editor of Investment Life & Pensions Moneyfacts, says, ‘Although rates are at their highest level for some time, continued uncertainty in the economic environment means there is no guarantee that rates will remain at this level.

‘Equally, it is essential that pensioners either take time to find the best annuity deal to suit their individual circumstances or take advantage of an adviser’s expertise.’