The last few months have shown an increase in pension annuity rates after a steady decline over the last few years. This is due to the recent rise in long term gilt rates which could rise further over the next few months.

Annuity rates took a hammering last year - down by around 10%. However, if your pension was still invested in the stock market you should have gained an equivalent amount in the value of the fund. 

This rise in the stock market may herald another large drop over this next year - so are you better off buying the annuity now?

There are a number of risks to the view that long term gilt yields will rise. One being the UK economy will recover without causing inflation and the second that a new government may actually try and actively reduce the public debt. However, I don’t believe either scenario is highly likely or that it will have a large influence on trend in long term gilt yields. 

The best compromise may be to reduce the risk on your pension fund dramatically and wait for annuity rates to rise. Although this is not a certain bet by any means, the trend is certainly upwards.

As always, good independent financial advice is essential.