2 May 2025 last updated

Retirement income up 150pc as annuity rates rise with Trump tariffs

Retirement income is up 150% with record record high gilt yields and recovering equity markets.

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Retirement income is 150% higher since the October 2020 low as annuities and gilt yields rise with recovering equity markets after Trump tariffs.

For those that remain invested in a portfolio tracking the FTSE-100 index, the buying power of a pension fund reached a low of £5,016 pa in October 2020 and this has increased by 150.0% to £12,542 pa in May 2025.

Our data combines the buying power of a pension fund tracking the FTSE-100 index and what income this can produce when buying an annuity over time.

The start for the data is July 2008 during the financial crisis when the FTSE-100 index was 5,411 and the index has increased to 8,596 by 2 May 2025. The annuity rates are for our benchmark for a 65 year old using £100,000 to purchase a lifetime annuity on a single life and level basis. The income was £7,908 pa in July 2008 and this compares to the current income of £7,895 pa in May 2025.

Find related news here:
Annuity rates rise 20pc over sixteen months as gilt yields hit record high
Gilt yields fall 40 basis points from peak after Trump tariffs back down

The 15-year gilt yields peaked on 9 April 2025 at 5.29% after President Donald Trump imposed a minimum 10% tariff on all countries with extra tariffs were imposed on 60 countries. The highest tariffs are on China with 145% tariffs on $145bn of goods and China imposing a 125% tariff on £440bn of US goods.

Providers of annuities sharply increased rates with our benchmark pension income rising 6.0% this year to £7,895 pa by 2 May which is a sixteen year high.

As Trump backed down on the extra tariffs with a 90-day suspension announced on 9 April, equity markets have recovered with the FTSE-100 index rising to 8,596 increasing the buying power of a pension fund.

The chart below shows how the buying power of a £100,000 pension fund has changed over time with an increase and decrease in fund value and annuity rates, this is the income that could be generated.

Benchmark annuity rates and FTSE-100 index   Nov Dec Jan Feb Mar Apr May FTSE 8,287 8,173 8,673 8,676 8,587 8,475 8,596 Rate £7,540 £7,446 £7,552 £7,639 £7,652 £7,888 £7,895 Fig 1: Chart and table comparing retirement income from 2008 to 2025

The above chart shows those invested with a fund of £100,000 in July 2008 could purchase an income of £7,908 pa and now with a fund tracking the FTSE-100 index, higher equity markets and annuity rates can purchase an income of £12,542 pa.

The FTSE-100 index reached a low of 5,577 in October 2020 with the 15-year gilt yields reaching a low of 0.162% in March 2020 due to the Covid pandemic.

This combination of strong equity markets and annuity rates rising to a sixteen year high has significantly increase retirement income from pension funds.

The Bank of England expected to reduce interest rates by -0.25% at the May meeting from 4.50% to 4.25%. The market forecasts two further cuts possibly to 3.75% by the end of the year and usually we can expect gilt yields to reduce along with annuity rates.

Even if annuity rates reduce this may be countered by Trump and the administration negotiating successful trade deals with most countries as this could significantly boost equity markets and pension funds.

Trump has already back down by easing tariffs on auto parts and on 29 April stated the 145% tariff on China is high and will come down substantially but not to zero.

If you are considering to add secure income for part or all of your pension fund, the current high annuities is an ideal time to lock-in these rates before any reduction during the year.

You can use a purchased life annuity to secure income if you have cash in your bank where the majority of the income is deemed a return of capital and therefore tax free.

To find out how the record rise in annuity rates has increased your retirement income for your age, click this link annuity rates table.