Annuity Income Estimator 2026
Estimates based on indicative 2026 market rates. Actual rates vary by provider. Always use the open market option and compare quotes. Not financial advice.
Current UK Annuity Rates — February 2026
Indicative rates for a £100,000 pension, no guarantee, no escalation, single life unless stated. Rates from multiple providers.
| Age | Single Life Level | Single Life RPI | Joint Life (50%) | Enhanced (Smoker) |
|---|---|---|---|---|
| 60 | £5,500/yr | £3,800/yr | £4,900/yr | £6,800/yr |
| 65 | £6,500/yr | £4,400/yr | £5,700/yr | £8,100/yr |
| 70 | £7,800/yr | £5,200/yr | £6,800/yr | £9,700/yr |
| 75 | £9,900/yr | £6,500/yr | £8,500/yr | £12,400/yr |
| 80 | £13,200/yr | £8,400/yr | £11,200/yr | £16,500/yr |
What Is a Pension Annuity?
A pension annuity is a financial product where you exchange your pension pot (or part of it) for a guaranteed income for life (or a fixed term). It is purchased from an insurance company and provides certainty: no matter how long you live, the income continues. This is the key advantage over drawdown, where you bear the investment risk and the risk of running out of money.
Annuities fell dramatically out of fashion after the 2015 Pension Freedoms legislation gave retirees far more flexibility. However, with interest rates rising sharply from 2022, annuity rates have improved significantly, making them far more competitive than they were during the years of ultra-low rates between 2009 and 2021.
How Are Annuity Rates Calculated?
Insurance companies price annuities based primarily on two factors: UK gilt yields (long-term government bond interest rates) and life expectancy statistics. When gilt yields rise, annuity rates improve because insurers can earn more on the premium you pay them. When life expectancy increases, rates fall slightly because they expect to pay income for longer.
Your individual rate is also affected by:
- Your age: The older you are, the higher the rate, because the income period is shorter.
- Your health: Poor health or certain lifestyle factors qualify you for enhanced rates.
- Your postcode: Life expectancy varies by region; some postcodes attract higher rates.
- Pot size: Larger pots sometimes attract marginally better rates.
- Annuity type: Level, escalating, single life, or joint life all affect the starting income.
Types of Annuity Explained
Level Annuity: Pays the same fixed amount every year for the rest of your life. Provides the highest starting income but loses purchasing power to inflation over time. Suitable if you have other inflation-linked income (such as a DB pension or State Pension) and want to maximise early retirement income.
Escalating Annuity (Fixed Rate): Increases by a fixed percentage each year (commonly 3% or 5%). The starting income is lower than a level annuity, but it keeps more of its purchasing power over a long retirement. A 3% escalating annuity typically starts around 25–30% lower than a level annuity.
RPI-Linked Annuity: Rises each year in line with the Retail Price Index. Offers the best long-term inflation protection but has the lowest starting income — around 35–40% lower than a level annuity at current rates.
Single Life Annuity: Pays income to you alone. Payments stop when you die (unless a guarantee period applies). Higher income than joint life for the same pot.
Joint Life Annuity: Continues to pay income to your spouse or partner after your death, typically at 50% or 66% of the original amount. Lower starting income but provides financial security for a survivor.
Common Mistake: Many people take the income offered by their existing pension provider without shopping around. Using the open market option typically generates 10–20% more income — on a £100,000 pot this could mean an extra £650–£1,300 per year for the rest of your life.
Enhanced Annuities: Health and Lifestyle
If you have a medical condition or lifestyle factor that is likely to shorten your life expectancy, you may qualify for an enhanced annuity (sometimes called an impaired life annuity). The insurer pays a higher income because they statistically expect to pay it for a shorter period.
Conditions that typically qualify for enhanced rates include:
- Type 2 diabetes
- Heart disease or previous heart attack
- Stroke or TIA
- Cancer (current or historical)
- Chronic obstructive pulmonary disease (COPD)
- High blood pressure requiring medication
- Being a current or ex-smoker (even if not suffering illness)
- High BMI / obesity
Enhanced rates typically pay 10–30% more than standard rates. For severe conditions such as terminal illness, the uplift can be 50% or more. Always declare your full health history when seeking annuity quotes.
The Open Market Option: Why You Must Shop Around
Under FCA rules, pension providers must tell you about the open market option — your right to purchase an annuity from any provider, not just your existing pension company. Research consistently shows that retirees who shop around receive significantly higher incomes than those who accept their provider's default rate.
The process involves obtaining quotes from multiple providers, either directly or through a specialist annuity broker or service such as MoneyHelper's Pension Wise service (free, impartial guidance) or a regulated financial adviser. The entire process typically takes 4–8 weeks.
Annuity vs Drawdown: Making the Choice
The choice between an annuity and drawdown is one of the most significant financial decisions you will make. Key considerations:
| Consider Annuity If... | Consider Drawdown If... |
|---|---|
| You want certainty of income | You want flexibility over withdrawals |
| You have poor health (enhanced rates) | You are in good health and may live long |
| You do not want to manage investments | You are comfortable with investment risk |
| Essential expenses exceed State Pension | State Pension covers essential living costs |
| You have a joint life need | You wish to leave pension to beneficiaries |
Fixed Term Annuities
A fixed term annuity (also called a temporary annuity) pays guaranteed income for a set period (typically 3–25 years) rather than for life. At the end of the term, you receive a maturity value which you can use to buy a lifetime annuity or enter drawdown. Fixed term annuities can be useful as a bridge to State Pension age or while waiting for annuity rates to improve further.
How Annuity Rates Have Changed Since 2022
The improvement in annuity rates since the Bank of England began raising interest rates in December 2021 has been dramatic. Consider a 65-year-old with a £100,000 level single-life pension pot:
- 2021 (rates at historic lows): Income of approximately £4,300–£4,600/year
- 2023 (rates rising fast): Income of approximately £6,200–£6,800/year
- Early 2026 (rates stabilised at elevated levels): Income of approximately £6,400–£7,200/year
This represents an improvement of over 50% compared to the worst rates seen in 2021. Those who delayed purchasing an annuity have benefited significantly. However, if base rates fall back, annuity rates will follow, making the current environment potentially attractive for those considering purchase.
Frequently Asked Questions
What are the best annuity rates currently available in 2026?
As of early 2026, the best rates for a healthy 65-year-old purchasing a £100,000 level single-life annuity are approximately £6,800–£7,200 per year from the top providers. Enhanced annuities for those with qualifying health conditions can pay considerably more. Rates are currently around their best levels since before the 2008 financial crisis, though they have stabilised somewhat from the 2023 peak.
Can I buy an annuity with only part of my pension?
Yes. You do not have to annuitise your entire pension. A popular strategy is a partial annuity: use part of your pot to buy an annuity that covers essential living costs, and keep the rest in drawdown for flexibility and potential growth. This combines the security of guaranteed income with the flexibility of drawdown.
What is the guaranteed period on an annuity?
A guaranteed period means the annuity continues to pay income for a minimum number of years even if you die during that period. Common guarantee periods are 5 or 10 years. If you die in year 3 of a 10-year guaranteed annuity, your beneficiaries receive the remaining 7 years of payments. Adding a guarantee period slightly reduces the income amount but provides some death benefit protection.
Is annuity income taxed?
Yes. Annuity income is taxed as earned income (in the same way as a salary or pension income). If your total income in retirement — including the State Pension — exceeds the Personal Allowance (£12,570 in 2025/26), you will pay income tax at your marginal rate. Your annuity provider will operate PAYE and deduct tax automatically.
Can I change my annuity provider after purchase?
No. Unlike other financial products, annuities are irreversible once purchased. This is why shopping around before purchase is so important. The income amount, type, and terms are fixed at the point of purchase and cannot be changed. Some providers offer a 30-day cooling off period, but this is not universal and you should check before committing.
What is an impaired life annuity?
An impaired life annuity (a type of enhanced annuity) offers higher income to people with serious health conditions that significantly reduce life expectancy — such as terminal cancer, severe heart failure, or certain neurological conditions. Uplifts of 30–100% or more above standard rates are possible. The process involves a detailed medical underwriting assessment and may require GP reports or medical records.