Annuity Calculator
Estimate the annual income an annuity would provide from your pension pot, using current UK annuity rates.
Reviewed by Richard Ross · Last updated April 2026
How Annuity Calculator works
How annuity rates work
An annuity pays a guaranteed income for life in exchange for your pension pot. Rates are expressed as the annual income per £10,000 of pot. At 65, a level single-life annuity typically pays around £630–700 per year per £10,000 in early 2025.
Factors affecting annuity rates
Age (older buyers get better rates), health (enhanced annuities for smokers and those with medical conditions), interest rates (higher rates → higher annuities), annuity type (level pays more than index-linked), and life basis (single pays more than joint).
Annuity vs drawdown
An annuity provides certainty — you cannot outlive it. Drawdown offers flexibility and potential for higher returns, but carries investment risk and longevity risk (running out of money). Many retirees use a combination: annuity for essential income, drawdown for discretionary spending.
Enhanced and impaired-life annuities
If you smoke, have a medical condition, or a shorter life expectancy, you may qualify for an enhanced annuity paying significantly more than standard rates. Always shop around using the open market option — your pension provider's own annuity is rarely the best available.
Annuity rates and the gilt market
UK annuity rates are closely linked to long-term gilt (UK government bond) yields. When gilt yields rise — as happened sharply in 2022-23 — annuity rates improve. In 2025, a 65-year-old can buy a level single-life annuity for roughly £630–700 per year per £10,000 invested, significantly better than the £500–550 available in 2020-21 at the same age. Timing your annuity purchase around market conditions can materially affect your income for life.
HMRC rules and taxation of annuity income
Annuity income derived from the taxable 75% of your pension pot is treated as pension income and taxed under PAYE at your marginal rate. If you used the full 25% tax-free lump sum separately, all your annuity income is taxable. If you bought the annuity with the full pot (taking no separate tax-free cash), HMRC treats 25% of each annuity payment as tax-free — known as an "open market option" annuity structure. Always confirm the tax treatment with your annuity provider.
Fixed-term annuities
A fixed-term annuity pays a guaranteed income for a set period — typically 5, 10, or 15 years — rather than for life. At the end of the term, you receive a maturity value (a guaranteed sum) which can be used to buy a lifetime annuity, fund drawdown, or take as a lump sum. Fixed-term annuities suit retirees who want income certainty for the near term but want to defer the decision on a lifetime annuity (perhaps expecting rates to improve, or deferring until their state pension starts and their income gap narrows). The key risk is that the maturity value may be lower than expected if you have elected a high-income option, and you still face the same open market decision at the end of the term.
The annuity shopping and medical underwriting process
Buying an annuity requires obtaining quotes from multiple providers using the open market option — accepting the default from your pension provider is rarely optimal. The process involves submitting a quotation request that includes your pot size, age, health disclosures, and the annuity type you want. Providers assess health disclosures (smoking history, BMI, diagnosed conditions, medications) and return individual quotes within a few days. Quotes are typically valid for 2–4 weeks. The highest quote is not automatically the best deal — factor in the provider's financial strength (check their Solvency II coverage ratio and credit rating) and any guarantee period or value protection features. Once you accept a quote and complete the application, the annuity typically starts within 4–8 weeks and is irreversible from that point.
Worked example: how much income does a £100,000 annuity pay?
At age 65, using indicative April 2025 market rates of approximately £650 per £10,000 of pot: • Level single-life: £100,000 ÷ £10,000 × £650 = £6,500/year (£542/month). Break-even age: 65 + (100,000 ÷ 6,500) ≈ 80 years old. • Joint life (50% to spouse): £650 × 0.92 = £598/year per £10,000. Total: £5,980/year (£498/month). • RPI-linked single-life: £650 × 0.70 = £455/year per £10,000. Total: £4,550/year (£379/month). The RPI-linked option starts roughly 30% lower but increases each year with inflation. At 3% inflation, it overtakes the level income at approximately year 12. For a £200,000 pot, these figures simply double: £13,000/year level, £11,960/year joint (50%), or £9,100/year RPI-linked. These are indicative estimates only. Actual quotes vary by provider, health status, and market conditions at the date of purchase. Always obtain at least three quotes using the open market option.
Source: HMRC — Tax when you get a pension, GOV.UK (gov.uk/tax-on-pension). MoneyHelper — Annuities explained (moneyhelper.org.uk). FCA — Retirement income and annuities (fca.org.uk). FCA — Solvency II and annuity provider strength (fca.org.uk).
Frequently asked questions
How much annuity will £100,000 buy?
At age 65, a level single-life annuity from £100,000 provides approximately £6,500–7,000/year (£542–583/month) at current market rates. Rates vary — always get quotes from multiple providers.
Is an annuity better than drawdown?
It depends on your health, circumstances, and risk tolerance. Annuities are best for those who want certainty and have no other guaranteed income. Drawdown suits those with other guaranteed income, good health, and ability to manage investment risk.
Can I change my mind after buying an annuity?
No. Annuities are irreversible once purchased. There is a brief cooling-off period (typically 30 days) after sale but generally once committed, it is permanent. This is why shopping around before purchasing is critical.
What happens to my annuity when I die?
A single-life annuity simply ends. A joint-life annuity continues paying a proportion to your spouse/partner. A guarantee period annuity pays out for a minimum period (e.g., 5 or 10 years) even if you die sooner. Value protection returns a portion of the premium on death. Unlike pension drawdown funds, an annuity income stream does not form part of your estate — making its inheritance tax treatment very different from keeping funds in drawdown.
Inheritance tax treatment of pensions vs annuities →Do I have to buy an annuity with my pension?
No. Since the pension freedoms introduced in April 2015, there is no requirement to buy an annuity. You can keep funds in drawdown, take lump sums, or combine approaches. However, annuities still suit many people who want predictable, guaranteed income and protection against living longer than expected.
What is the open market option?
The open market option is your right to shop around for the best annuity rate rather than buying from your existing pension provider. Research consistently shows that switching providers can increase annuity income by 10–30%. Always use a comparison service or independent adviser before purchasing an annuity.
Can I get a better annuity rate if I have a health condition?
Yes. Enhanced or impaired-life annuities pay higher rates to people with reduced life expectancy due to health conditions including heart disease, diabetes, obesity, high blood pressure, or a history of smoking. Rates can be 20-30% higher than standard rates. You should always disclose any health conditions when shopping for an annuity and use the open market option to compare providers rather than accepting your current pension provider's rate.
What is the open market option?
The open market option is your right to shop around for an annuity rather than accepting the rate offered by your pension provider. Rates vary significantly between providers — up to 20% difference for the same pot size and personal circumstances. You should obtain quotes from multiple providers or use a broker. The Money and Pensions Service (MoneyHelper) provides a free annuity comparison service.
Can I change my mind after buying an annuity?
You have a 30-day cooling-off period after purchasing an annuity during which you can cancel for a full refund. After that period, annuities are irreversible. This is one of the key drawbacks compared to drawdown. Once you have committed, you cannot access the capital if your circumstances change — it is an exchange of your pot for a guaranteed income stream for life.
How does inflation affect an annuity income?
A level annuity pays a fixed amount for life, meaning its real purchasing power erodes with inflation. At 3% annual inflation, the real value of a level income halves in approximately 23 years. An inflation-linked (RPI or CPI) annuity increases annually but starts at a lower initial income — typically 25-35% less than a level annuity. Whether the inflation-linked version is worth the lower starting income depends on how long you live and the actual path of inflation.
What is a fixed-term annuity and how does it differ from a lifetime annuity?
A fixed-term annuity pays a guaranteed income for a set period (typically 5–15 years) rather than for life. At the end of the term you receive a maturity value — a guaranteed lump sum — which you can use to buy a lifetime annuity, fund drawdown, or take as taxable income. Fixed-term annuities suit retirees who want near-term income certainty but want to defer the permanent lifetime commitment, perhaps expecting interest rates (and therefore annuity rates) to improve. The main risk is that the maturity value may be smaller than expected depending on the income you elected to take during the term.
What health conditions qualify for an enhanced annuity?
Enhanced annuities pay more to people with reduced life expectancy. Conditions that commonly qualify include: heart disease, diabetes (Type 1 or 2), stroke, cancer, kidney disease, multiple sclerosis, respiratory diseases such as COPD, and lifestyle factors including smoking and obesity. The improvement in rate varies by condition and severity — a smoker may get 5–10% more, while serious conditions like advanced heart failure can increase income by 30–40%. Disclose all relevant conditions accurately when applying; understating health history can invalidate the policy.
Can I split my pension between a lifetime annuity and drawdown?
Yes, this is called a blended retirement or "blend and blend" strategy. You use part of your pension pot to buy a guaranteed annuity that covers essential income (covering fixed costs like rent, utilities, and food), and keep the rest in drawdown for discretionary spending and potential growth. This provides a secure income floor without converting the entire pot irrevocably. Many retirees also use the state pension as the guaranteed base and keep all their DC pot in drawdown — the right split depends on how much guaranteed income you already have from state pension and any defined benefit schemes.
How much annuity will £200,000 buy at 65?
At age 65, £200,000 buys approximately £13,000–14,000/year (£1,083–1,167/month) from a level single-life annuity at current market rates. A joint-life annuity (50% to spouse) reduces this to roughly £11,960/year. An RPI-linked version starts at around £9,100/year. These are indicative market estimates — rates vary between providers, and your own health and lifestyle disclosures may qualify you for enhanced rates above these figures. Always obtain multiple quotes before purchasing.
What is the break-even age for an annuity?
The break-even age is the point at which cumulative annuity payments equal the lump sum you paid in. For a level single-life annuity at age 65, the break-even is typically around 80 years old (approximately 15 years of payments at standard rates). If you live beyond 80, you receive more in total than you put in. If you die before 80, you received less. The break-even age varies depending on the annuity rate, the type of annuity, and whether any value protection or guarantee period was purchased. Use this calculator to see the break-even for your specific pot size and age.
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This calculator provides estimates for informational purposes only. It is not a substitute for personalised pension or financial advice. Speak to a regulated financial adviser before making pension decisions.