Since January 2008, there have been 39 annuity rate movements and this has heated up in recent weeks with 17 rate changes in the last month, 15 of which were upwards.

Today’s yield for a 65 year-old male is now 7.66 per cent p.a. this is 11 per cent higher than the yield in March 2006 of 6.92 per cent.

This is a result of increasing yields on corporate bonds as their value decreases and the impact of the credit crunch causing the spreads on financial corporate bonds in particular to significantly widen.

There are also real inflationary fears, which could result in a further increase in yields, causing a knock-on effect for annuities.

Pensions analyst, Nigel Callaghan, says, ‘Yields on corporate bonds have widened significantly since last summer, which many retiring investors are taking full advantage of by locking into the highest rates since 2003.’

The future for annuity rates is a mixed picture. Future life expectancy is still on the increase and many corporate bond managers are arguing that the markets have already price in the vast majority of bad news, a factor that could drive annuity rates down.

However, if the economy does nose dive, companies and individuals find it more difficult to borrow and inflation takes off, rates may stay at these levels or could even be forced higher still.

Callaghan adds, ‘Equity values have recovered to some degree since the market falls in January, and looking at current annuity rates we are starting to feel that this may in fact represent an opportunity for investors.