Comparing + more

🔥 Join the 15,000+ people we have helped plan for retirement Get started →

Home›Retirement Planning›Annuities
📈 Annuities Explained

Annuities: Guaranteed Income for Life

Annuity rates have improved significantly since 2022. A 65-year-old can now expect around £7,000–£7,500 per year from a £100,000 pot. Up to 60% of retirees may qualify for an enhanced annuity paying even more. Get expert advice to find the best rate.

  • FCA-regulated advisersFCA Advisers
  • Get Matched For FreeFree Matching
  • Takes 60 seconds to start60 Second Process
  • Rated 4.9★ online reviewsRated 4.9★ Online
Get Pension Advice →
Couple considering annuity options for retirement
15,000+
People Helped
FCA
Regulated Advisers
60s
To Get Started
4.9★
Online Rating
📋 Get your free advice

Get annuity advice in 60 seconds

Answer a few simple questions and get matched with an FCA-regulated pension adviser who specialises in annuities. Free, no obligation.

What Are Annuities and How Do They Work?

An annuity is a financial product that converts your pension pot into a guaranteed income for life. When you reach retirement age (currently 55, rising to 57 in 2028), you can use some or all of your defined contribution pension savings to purchase an annuity from an insurance company. In return, they pay you a regular income that is guaranteed to continue for as long as you live, regardless of how long that may be.

Annuity rates have improved significantly since 2022 due to rising interest rates. A 65-year-old with a £100,000 pension pot can now expect annual income of around £7,000 to £7,500 from a standard level annuity, compared to roughly £5,000 in 2021. However, rates vary significantly between providers, making it essential to shop around on the open market rather than accepting your existing provider’s offer.

There are several types of annuity available in the UK, and choosing the right one depends on your health, circumstances, and priorities. Key areas to understand include:

  • Level annuities – pay the same amount each year. The starting income is higher but purchasing power reduces over time due to inflation.
  • Escalating annuities – income increases each year by a fixed percentage (e.g. 3%) or in line with RPI/CPI inflation. Starting income is lower but protects against rising costs.
  • Enhanced annuities – pay a higher income if you have certain health conditions or lifestyle factors such as smoking, diabetes, high blood pressure, or heart disease. Up to 60% of retirees may qualify.
  • Joint-life annuities – continue paying a reduced income (typically 50% to 66%) to your spouse or partner after you die.
  • Guarantee periods – ensure payments continue to your estate for a set period (usually 5 or 10 years) even if you die within that time.
  • Investment-linked annuities – income varies based on investment performance. Offers potential for growth but carries more risk than a standard annuity.
Key fact: According to the FCA, around 80% of people who buy an annuity without shopping around could get a better deal elsewhere. The difference between the worst and best annuity rates can be as much as 20%, which over a 20-year retirement could mean tens of thousands of pounds in lost income.
Annuity Comparison

Level vs Escalating vs Investment-Linked Annuities

Understanding the different annuity types is essential for choosing the right guaranteed income in retirement.

FeatureLevel AnnuityEscalating AnnuityInvestment-Linked
Starting incomeHighest starting incomeLower starting incomeVariable, depends on fund
Income over timeStays the same (loses value to inflation)Increases each yearCan go up or down
Inflation protectionNo protectionBuilt-in protectionPossible but not guaranteed
Risk levelNo risk – fixed incomeNo risk – guaranteed increasesInvestment risk applies
Best forThose needing maximum income nowThose planning a long retirementThose comfortable with market risk
Death benefitsStops on death (unless guarantee period)Stops on death (unless guarantee period)Stops on death (unless guarantee period)
Important: Once you purchase an annuity, the decision is irreversible. You cannot change the terms or get your money back. This is why professional advice is strongly recommended before committing your pension savings to any annuity product.
Who Is It For?

Who Benefits from Annuity Advice?

If any of these situations apply to you, professional annuity advice could significantly improve your retirement income.

🏥

Health Conditions

If you have any medical conditions, you may qualify for an enhanced annuity paying 20% to 40% more than a standard rate. Many people miss out simply because they do not disclose their health history.

Check if you qualify for enhanced rates
💰

Large Pension Pots

If your pension pot is over £100,000, the difference between the best and worst annuity rates could be worth thousands of pounds per year. Professional advice ensures you get the best possible deal.

Shop the open market with expert help
👫

Married or in a Partnership

A joint-life annuity protects your partner financially after you die. An adviser can help you balance the trade-off between higher single-life income and the security of joint-life protection.

Consider joint-life annuity options
📊

Wanting a Blended Approach

Many retirees use part of their pension for an annuity covering essential bills and keep the rest in drawdown for flexibility. An adviser can design the optimal split for your situation.

Explore annuity and drawdown combinations
⏰

Recently Retired or About To

Annuity rates change regularly based on gilt yields and life expectancy data. Timing your purchase and choosing the right provider at the right moment can significantly affect your lifetime income.

Get current rate comparisons
🧓

Concerned About Running Out of Money

Unlike drawdown, an annuity guarantees income for life regardless of how long you live. If longevity risk worries you, an annuity removes that uncertainty entirely.

Secure guaranteed lifetime income

Not sure which annuity is right for you?

Get matched with an FCA-regulated pension adviser who can compare annuity rates across the whole market and find the best deal for your circumstances.

Get Pension Advice →
Costs Explained

How Much Does Annuity Advice Cost?

Annuity advice costs vary, but the right guidance often pays for itself through better rates and enhanced annuity qualification.

£500–£2,000
Initial Annuity Advice
One-off fee for a full annuity comparison, health assessment for enhanced rates, and personalised recommendation. Some advisers charge a percentage of your pension pot (typically 1% to 2%) instead.
0.5%–1%/year
Ongoing Review
Annual fee if you choose a blended annuity/drawdown approach where the drawdown element needs ongoing management and regular reviews.
Worth knowing: Through PensionHelper, our matching service is free with no obligation. The adviser will explain their fees upfront before you commit. Many people find that professional annuity advice pays for itself within the first year through better rates alone.
Simple Process

How It Works

1

Tell us about yourself

Quick questions about your pension situation. Done in 60 seconds.

2

Get matched with an adviser

We connect you with an FCA-regulated pension specialist suited to your needs.

3

Receive your advice

Your adviser reviews your situation and recommends the best course of action.

Real Reviews

What Our Customers Say

Margaret T.
Margaret T.
Surrey • Annuity Advice
★★★★★
“Enhanced annuity made a huge difference”

I mentioned my high blood pressure during the consultation and qualified for an enhanced annuity. My annual income is now £1,400 more than the standard rate my old provider offered. Over 20 years, that is an extra £28,000.

David H.
David H.
Kent • Annuity Advice
★★★★★
“Shopped around and saved thousands”

My existing provider quoted me £5,800 per year. The adviser found a better provider offering £6,950 for the same pot. I would never have known the difference existed without professional help.

Susan P.
Susan P.
Lancashire • Annuity Advice
★★★★★
“Joint annuity gave us peace of mind”

We chose a joint-life annuity so my husband would still receive income if I passed away first. The adviser explained every option clearly and helped us find the right balance between income and protection.

Brian K.
Brian K.
Devon • Annuity Advice
★★★★★
“Perfect blend of annuity and drawdown”

The adviser recommended splitting my pension – an annuity covering my basic living costs and drawdown for extras and holidays. It gives me security plus flexibility, which is exactly what I wanted.

Carol M.
Carol M.
Edinburgh • Annuity Advice
★★★★★
“Escalating annuity was the right choice”

I was initially tempted by the higher level annuity income, but the adviser showed me how inflation would erode my spending power. The escalating annuity starts lower but will be worth much more in 15 years.

Peter R.
Peter R.
Bristol • Annuity Advice
★★★★★
“Avoided a costly mistake”

I was about to accept my workplace pension provider annuity quote without shopping around. The adviser found me £1,200 per year more from a specialist provider. That one conversation changed my entire retirement.

Learn More

Related Guides

Explore our guides for more information about annuities and retirement income options.

Pension Drawdown

Flexible income alternative to annuities

Retirement Income Planning

How to build a sustainable income

Pension Lump Sum

Taking your 25% tax-free cash

Over 50s Pension Advice

Expert guidance for the over 50s

Retirement Planning Guides

Complete guide collection

Pension Pot Guide

Understanding your pension savings
Got Questions?

Annuities: Frequently Asked Questions

An annuity is a financial product that converts your pension savings into a guaranteed regular income for life. You pay a lump sum from your pension pot to an insurance company and they pay you a fixed income every month, quarter, or year for as long as you live. Once purchased, the terms are fixed and cannot be changed.
Annuity rates in 2026 are significantly better than recent years due to higher interest rates. A healthy 65-year-old with a £100,000 pot can expect around £7,000 to £7,500 per year from a standard level annuity. Rates vary by provider, so shopping around on the open market is essential. Enhanced annuities for those with health conditions can pay considerably more.
Generally, no. Once you have purchased an annuity, the decision is irreversible and you cannot get your money back or change the terms. There were brief proposals to allow annuity resale, but these were shelved by the government. This is why it is so important to get the decision right first time with professional advice.
With a standard single-life annuity, payments stop when you die and your estate receives nothing. However, you can add options: a guarantee period (typically 5 or 10 years) ensures payments continue to your estate, and a joint-life annuity continues paying a reduced income to your spouse or partner. These options reduce the starting income but provide protection.
It depends on your priorities. An annuity provides guaranteed income for life with no investment risk, while drawdown offers flexibility and potential growth but your pot can run out. Many retirees use a combination of both – an annuity for essential expenses and drawdown for discretionary spending. An adviser can help you decide the right balance.
An enhanced annuity pays a higher income than standard rates if you have health conditions or lifestyle factors that may reduce your life expectancy. Conditions like diabetes, heart disease, high blood pressure, cancer history, or even being a smoker or overweight can qualify you. Up to 60% of retirees may be eligible, so it is always worth checking.
A 65-year-old with a £100,000 pension pot can currently expect around £7,000 to £7,500 per year from a standard level annuity. This increases to around £8,000 to £9,000 with an enhanced annuity for those with qualifying health conditions. Rates improve with age, so a 70-year-old would receive more per year than a 60-year-old.
Yes, annuity income is taxed as earned income. You can usually take 25% of your pension pot as a tax-free lump sum before buying the annuity with the remaining 75%. The annuity income itself is then added to your other income and taxed at your marginal rate (20% basic, 40% higher, or 45% additional rate).
Yes, you can buy an annuity from age 55 (rising to 57 from 2028). However, annuity rates are based partly on your age, so buying younger means a lower annual income because the provider expects to pay you for longer. Many people delay their annuity purchase or use drawdown initially and buy an annuity later when rates are more favourable.
A joint-life annuity continues paying income to your spouse or partner after you die, typically at 50% or 66% of the original amount. This provides financial security for your surviving partner but reduces the initial income compared to a single-life annuity. The reduction depends on the age gap between you and your partner.
Absolutely. The FCA has found that around 80% of people who accept their existing provider’s annuity offer could get a better deal elsewhere. Using the open market option costs nothing and can increase your annual income by 10% to 20%. An adviser can search the entire market for you, including specialist enhanced annuity providers.
Yes, this is known as a blended approach and is increasingly popular. You can use part of your pension pot to buy an annuity covering your essential living costs and keep the remainder in drawdown for flexibility, growth potential, and ad-hoc withdrawals. This gives you the security of guaranteed income alongside flexible access.
A guarantee period ensures that annuity payments continue for a minimum period (typically 5 or 10 years) even if you die during that time. If you die within the guarantee period, the remaining payments go to your estate or nominated beneficiaries. Adding a guarantee period slightly reduces your starting income but provides protection against early death.
Annuity rates are closely tied to gilt yields and interest rates. Following the Bank of England rate increases since 2022, annuity rates improved substantially and remain at levels significantly higher than the historic lows of 2020-2021. Future movements depend on monetary policy, but current rates represent good value compared to recent history.
No. Once you have purchased an annuity, the contract is binding and cannot be altered, transferred, or cancelled. You cannot change the income level, switch from level to escalating, add a joint-life option, or get your lump sum back. This irreversibility is the main reason professional advice is so important before making this decision.

Ready to Compare Annuity Rates?

It takes 60 seconds. Free, no obligation. Get matched with an FCA-regulated pension adviser today.

Get Pension Advice →

15,000+ people helped • Rated 4.9★ online • FCA-regulated advisers