£300,000 in, how much income out?
Priced at age 65 in August 2026 — with annuity rates at an 18-year high — a £300,000 pension pot buys a single-life level annuity of about £23,250 a year (£1,938 a month) at the average rate of 7.75%. Shop the whole market and the best-buy rate of 8.36% lifts that to roughly £25,080 a year (£2,090 a month). Every figure on this page is indicative, August 2026.
Stack the average annuity on top of a full new State Pension (£12,548 in 2026/27) and a single person has close to £35,800 a year guaranteed for life — comfortably clear of the PLSA "moderate" standard of £31,300 and heading toward its "comfortable" benchmark.
| Shape of annuity (65) | Indicative rate | Yearly income | Monthly |
|---|---|---|---|
| Level, single life — average | 7.75% | £23,250 | £1,938 |
| Level, single life — best buy | 8.36% | £25,080 | £2,090 |
| Level, joint life 50% — average | ~6.75% | £20,250 | £1,688 |
| RPI-linked, single — starting income | ~6.25% | £18,750 | £1,563 |
Two shape decisions dominate the price. Joint-life cover (continuing 50% to a surviving partner) costs about £3,000 a year of income on £300k. Inflation-linking costs about £4,500 of starting income, but a level £23,250 will feel much smaller in 20 years while an RPI-linked income keeps pace.
The same £300k at different ages
| Purchase age | Indicative rate | Income on £300,000 |
|---|---|---|
| 55 | ~6.6% | ~£19,800/yr |
| 60 | ~6.9% | ~£20,700/yr |
| 65 | ~7.75% | ~£23,250/yr |
| 70 | ~8.8% | ~£26,400/yr |
| 75 | ~10.3% | ~£30,900/yr |
The jump from 65 to 75 is worth over £7,600 a year — which is why some people annuitise in slices as they age rather than all at once. The mechanics behind these numbers are explained in annuity rates by age.
Lump sum first: the £75,000 question
Taking the standard 25% tax-free cash gives you £75,000 upfront, leaving £225,000 to buy the annuity — about £17,440 a year at the average rate. That's £5,800 a year less income in exchange for a significant capital sum for the mortgage, home improvements or simply a cash buffer. Because annuity income is taxable — and a full State Pension already uses nearly all of the £12,570 Personal Allowance — the tax-free lump sum is the one part of the pot HMRC never touches, which is why most buyers take it.
Annuity or drawdown with £300k?
Keeping the £225,000 invested in flexi-access drawdown instead and drawing a cautious 4% produces about £9,000 a year plus the £75,000 lump sum. The annuity's £23,250 (full pot) or £17,440 (after cash) is dramatically higher and guaranteed — but inflexible, and there's nothing left to inherit unless you build in guarantees. Our side-by-side drawdown vs annuity with £300k runs both strategies over a full retirement.
A blended plan is often the strongest answer at this pot size: annuitise perhaps half to lock essential bills, keep the rest flexible. If you're deciding at 60 rather than 65, the maths shifts — see annuity vs drawdown at 60.
How a £300k pot compares
It's worth saying plainly: £300,000 is a substantial pension by UK standards, well above what most people reach by retirement age — our average pension pot at 65 page has the context. That cuts two ways. You have real choices that smaller pots don't get, including the luxury of blending guaranteed and flexible income. But you also have more to lose from a poorly shaped purchase, since every percentage point of rate and every shape decision is multiplied by 300,000.
A couple's view: two pensions, one household
£300,000 is often a household figure rather than one person's pot — say £200,000 in one name and £100,000 in the other. That changes the strategy. Two single-life annuities (about £15,500 and £7,750 a year respectively at the 7.75% average) pay more combined than one joint-life policy on the bigger pot, and each partner keeps income in their own name — which matters for tax, because each person has their own £12,570 Personal Allowance and each will have their own State Pension. The risk is that when the first partner dies, their annuity dies too, taking £7,750–£15,500 a year out of the household overnight. Couples therefore often mix approaches: joint-life cover on the larger pot, single-life on the smaller, sized so the survivor's guaranteed income still covers the bills. Run the survivor scenario before you buy, not after.
Mistakes £300k buyers actually make
- Accepting the ceding provider's quote. The default offer is rarely the market's best, and on £300,000 the gap compounds into tens of thousands over retirement.
- Skipping the health questionnaire. Ordinary prescriptions — statins, blood-pressure tablets — routinely qualify for enhanced pricing that healthy-life quotes ignore.
- Annuitising during a tax spike. Starting a £23,250 income mid-tax-year while still drawing a salary can push more of it into higher-rate tax than starting cleanly the following April would.
- Forgetting the MPAA. Buying a lifetime annuity doesn't normally trigger the £10,000 Money Purchase Annual Allowance, but taking flexible income from the drawdown half of a blended plan does — a trap if you intend to keep contributing.
- Treating the quote as permanent. Quotes lapse after a set window; if gilt yields move, the reissued figure can differ. Decide, then act promptly.
Getting the best deal on £300,000
- Never accept the first quote. The average-to-best-buy gap is £1,830 a year on this pot — over £45,000 across a 25-year retirement. Start with our best annuity rates guide.
- Disclose your health. Common conditions — diabetes, high blood pressure, a smoking habit — can qualify you for enhanced rates well above standard.
- Add a guarantee period. A 10-year guarantee costs little and means the income keeps paying your estate if you die early.
- Check smaller and larger pots. Comparing what £250k buys and what £500k buys shows how linearly income scales — and what a few more years of saving is worth.
An annuity purchase is permanent. With £300,000 at stake, an hour with an FCA-regulated adviser to stress-test the shape, provider and timing is cheap insurance against an irreversible mistake.