If you haven't looked at annuities for a few years, today's rates might surprise you.
The guaranteed income available from an annuity has risen significantly from the low-rate years.
For example, in April 2021, £100,000 could provide a 65-year-old with around £4,882 a year from a single-life, level annuity with a five-year guarantee.
By September 2026, a comparable example was providing around:
£8,030 a year, guaranteed for life
That's approximately £3,148 more every year, or a 64% increase in starting income, from the same £100,000 pension pot.
That's a significant change for anyone approaching retirement.
Indicative market rates published by Hargreaves Lansdown on 10 September 2026 showed:
Age | Approximate Annual Income |
|---|---|
55 | £6,964 |
60 | £7,364 |
65 | £8,081 |
70 | £8,869 |
75 | £10,102 |
These figures are for a single-life, level annuity with no guarantee period.
They're examples, not guaranteed quotes. Annuity rates change regularly and the amount available will depend on factors including your age, health, lifestyle and the options selected.
An annuity allows you to exchange some or all of your pension for a guaranteed income.
With a lifetime annuity, that income can continue for the rest of your life.
Some people may also qualify for an enhanced annuity because of certain health conditions or lifestyle factors, which can result in a higher income.
But guaranteed income comes with important trade-offs.
Once a lifetime annuity has been purchased and any cancellation period has ended, you typically can't change your mind or get back the pension money used to buy it.
A level annuity pays the same amount each year, so inflation can reduce what that income can buy over time.
Options such as an increasing income, a guarantee period or continuing income for a spouse or partner may be available, but these will normally reduce the starting income.
Pension drawdown works differently.
Your pension remains invested and you decide when and how much money to take.
This provides greater flexibility, but the income isn't guaranteed.
The value of your investments can fall as well as rise and is not guaranteed. Poor investment performance, taking larger withdrawals or living longer than expected could mean your pension runs down more quickly.
So the main difference is:
Annuity - guaranteed income, but less flexibility.
Drawdown - greater flexibility, but continued investment and longevity risk.
Neither option is automatically better or suitable for everyone.
Retirement options aren't necessarily limited to putting an entire pension into either an annuity or drawdown.
It may be possible to use part of a pension to purchase guaranteed income while leaving another part invested and available for flexible withdrawals.
There are different risks and benefits to each approach, and what's appropriate will depend on individual circumstances.
You don't normally have to accept the annuity offered by your existing pension provider.
Different providers can offer different rates, so comparing the market could result in a different level of guaranteed income.
It's also important to check an existing pension for valuable guarantees or benefits, including guaranteed annuity rates, before transferring or giving them up.
The government's free and impartial Pension Wise service can help you understand your defined contribution pension options.
Annuities aren't suitable for everyone.
But if your view of annuities was formed when £100,000 might have provided less than £5,000 a year, today's market looks very different.
For the comparable age-65 example:
April 2021: £4,882 a year
September 2026: £8,030 a year
That's around 64% more starting income.
For people approaching retirement, the increase means the guaranteed income currently available from an annuity may look very different from the rates they remember from only a few years ago.
Understanding how that guaranteed income compares with the flexibility and investment risks of pension drawdown can form part of considering the available retirement options.
Hargreaves Lansdown - Best annuity rates
Current indicative annuity rates used in this article. Rates generated 10 September 2026.
Hargreaves Lansdown - Historical annuity rate information
Historical annuity-rate information used for the April 2021 comparison.
MoneyHelper - Guaranteed retirement income (annuities) explained
Independent information about annuities, their features and shopping around.
MoneyHelper - Pension drawdown explained
Independent information about flexible pension withdrawals and investment risk.
MoneyHelper - Pension Wise
Free and impartial government-backed guidance about defined contribution pension options.
Annuity rates change regularly. The figures in this article are illustrative market examples, not guaranteed quotations. The income available will depend on individual circumstances, the provider and the options selected.
Once a lifetime annuity has been purchased and any cancellation period has ended, you typically cannot change your mind. Depending on the options selected, payments may stop when you die. A level annuity does not normally increase, so inflation can reduce the purchasing power of the income over time.
Money held in pension drawdown remains invested. The value of your investments can fall as well as rise and is not guaranteed. Taking money from your pension will reduce its value and could affect how long it lasts.
Taking pension benefits can have tax implications. Tax treatment depends on individual circumstances, and tax legislation and regulation can change.
Before making a decision, consider using the government's free and impartial Pension Wise service. If you're unsure about your retirement options, consider regulated financial advice.
This article provides general information only and does not constitute personalised financial or tax advice.