Pension Annuity Comparison UK (2026/27)

Pension annuity comparison UK — the short answer

In November 2026, a healthy 65-year-old with a £100,000 pension pot could buy between £6,703 and £8,198 a year from a single-life level annuity, according to MoneyHelper's comparison data. That gap of almost £1,500 a year, every year for life, is why comparing quotes matters more than picking a provider.

What is a pension annuity?

This guide compares the annuity types side by side, works out the tax, and shows the exact steps for getting quotes. A pension annuity is an insurance product that turns some or all of your defined contribution pension pot into a guaranteed income, usually for the rest of your life. You hand a lump sum to an insurer, and in return it pays you a set amount every month or year until you die. Once you buy it, the decision is almost always irreversible: you cannot get the capital back, change provider, or switch to a different income route with that money.

That irreversibility is the single most important fact in this whole guide. A pension is the arrangement that builds up your retirement savings while you work. An annuity is only one way of taking money out of it. The other main routes are flexi-access drawdown, where your pot stays invested and you withdraw from it, and taking lump sums as you need them. MoneyHelper's guide to annuities explains each route in plain terms. None of those routes locks your money away the way an annuity does, which is exactly why the comparison has to happen before you sign anything, not after.

UK Payroll Calculators is a free UK payroll and pension calculator site, and this guide is written for the person facing the decision, not for the industry. The numbers below come from MoneyHelper's annuity comparison data and GOV.UK, all dated, and the worked examples are our own arithmetic, shown step by step so you can check them.

Most people meet annuities through their pension provider's own offer. Your provider will write to you before retirement with a quote for an annuity with them. You are not obliged to take it. The open market option means you can take your pot to any provider on the market, and the difference between the best and worst quote for the same person can be more than a fifth of the income. That is the whole point of comparing.

While you are still working, pension contributions are part of your pay picture. They show on your payslip as a deduction, and employer pension contributions are part of what you cost your employer, on top of your salary. The pot you eventually compare annuities for is the sum of those years of contributions, investment growth, and tax relief.

How much income will a £100,000 pension pot buy in November 2026?

Annuity rates are quoted as a percentage of the purchase price, and the income they buy has risen sharply since 2022 because annuity providers invest mainly in government bonds, and bond yields rose with interest rates. MoneyHelper's comparison data, correct at 9 November 2026, shows what a healthy person with a £100,000 pot could get. The table below uses the highest and lowest incomes in that data for each annuity type, so you can see the range rather than a single cherry-picked figure.

Annual income for a healthy 65-year-old with a £100,000 pension pot, paid annually in arrears. Source: MoneyHelper annuity calculator data via Which?, correct at 9 November 2026. Figures are a guide only; your quote depends on your age, health, postcode and the options you choose.

Three things jump out of that table. First, the spread inside a single type is large: £6,703 against £8,198 for the same single-life level annuity is a difference of £1,495 a year, or 22.3% more income from the best quote than the worst, for the identical person and pot. Over a 20-year retirement that is nearly £30,000. Second, age matters a lot: a healthy 70-year-old with the same £100,000 pot could get between £7,515 and £9,086 a year for a single-life level annuity, because the insurer expects to pay for fewer years. Third, every protection you add costs income. A joint-life annuity that keeps paying half to a surviving partner tops out at £7,775 instead of £8,198. An annuity that rises by 3% a year starts at just £5,721.

Rates have been strong by recent standards. Which? reported in November 2026 that annuity rates for a healthy 65-year-old with a £100,000 pot have been above 7% since 2022 and consistently above 7.5% since the start of 2025, nudging above 8% recently. In the low-rate years before 2022, the same money bought roughly 4–5% a year. That history matters for the timing question later in this guide: buying when rates are high locks in a high income, but it also locks in the decision at that moment.

Your pot will rarely be exactly £100,000, and the income scales in proportion. At the top single-life rate of 8.198%, a £150,000 pot buys about £12,297 a year, and a £60,000 pot buys about £4,919 a year. The rate itself does not change much with pot size, though very small pots can attract slightly worse rates, and pots of £10,000 or less can be taken as small-pot lump sums instead, up to three of them from personal pensions.

Which type of annuity pays the most?

The highest starting income always comes from the simplest product: a single-life level annuity. It pays the same amount every year, stops when you die, and carries no protection for a partner and no defence against inflation. Everything else you add — a partner's income, rising payments, a guarantee period — is paid for out of your starting income. The question is never which type pays the most on day one. It is which type pays the most over your actual life, for the people who depend on you.

A level annuity pays a flat amount. £8,198 a year at 65 stays £8,198 a year at 85. That sounds fine until you price in inflation: at 3% inflation, £8,198 will buy in ten years what about £6,100 buys today. A level annuity is the right answer when you have other income that rises with inflation, such as the State Pension, and you want the maximum guaranteed income now.

An escalating annuity starts lower and rises each year, either by a fixed percentage such as 3% or in line with inflation. At 3% escalation the £100,000 pot buys £5,721 a year at 65, and that income takes about 12 years to catch up with the £8,198 level income. After that it keeps pulling ahead. Escalation suits someone who expects a long retirement and worries more about the cost of living at 85 than about income at 65.

A joint-life annuity keeps paying after the first death, usually at a reduced rate such as 50% to the surviving partner. The top joint-life 50% income in the November 2026 data is £7,775 a year, against £8,198 for single-life. The survivor then receives £3,887.50 a year for the rest of their life. For a couple where one partner has little pension of their own, that protection is usually worth the £423 a year it costs while both are alive.

A fixed-term annuity pays a guaranteed income for a set period, such as five or ten years, and then returns a lump sum or lets you choose again. It suits someone who wants guaranteed income now but expects rates or circumstances to change, or who wants to bridge the gap until the State Pension starts. A 65-year-old buying a five-year fixed-term annuity can revisit the decision at 70, when rates are higher because of age alone.

An enhanced annuity, also called an impaired-life annuity, pays more if your health or lifestyle shortens your expected lifespan. Smoking, diabetes, heart conditions, high blood pressure, being overweight, and several other factors can all qualify. Which? found in June 2025 that a 65-year-old with a £100,000 pot was quoted between 6% and 15% more for an enhanced annuity than a standard one, based on an overweight smoker taking medication for high blood pressure and high cholesterol. At the top standard rate of £8,198, a 15% enhancement is £9,428 a year — an extra £1,230 a year for life. Many buyers never declare their health conditions and never see that money.

Starting incomes from MoneyHelper annuity calculator data, correct at 9 November 2026 (enhanced figure is our arithmetic: £8,198 plus 15%, the top of the range Which? found in June 2025). Your quote will differ by age, health, postcode and options.

Some pensions contain a guaranteed annuity rate written into the policy, usually from the 1980s or 1990s. If yours does, it will almost always beat anything on the open market, because those guarantees were set when rates were far higher. Ask your provider directly whether you have one before you compare anything else. It is the one case where shopping around is a waste of time.

What decides the annuity rate you are offered?

Five things decide your rate, and only one of them is the market. Knowing all five tells you which levers you can actually pull.

Age is the biggest personal factor. The older you are when you buy, the higher the rate, because the insurer expects to pay for fewer years. The November 2026 data shows the jump clearly: a healthy 65-year-old tops out at £8,198 a year per £100,000, while a healthy 70-year-old tops out at £9,086. Waiting is not free money, though: every year you wait is a year without annuity income, and you need to live long enough afterwards to make the wait pay.

Health works backwards from every other insurance product. Poor health means a higher annuity rate, because the insurer expects a shorter payment period. This is why disclosing conditions matters so much. Smokers, people with diabetes or heart disease, and people taking regular medication for blood pressure or cholesterol routinely qualify for enhanced rates. The underwriting is a short health questionnaire, not a medical examination in most cases, and the uplift applies for life.

Your postcode plays a smaller part. Providers use it as a rough guide to life expectancy in your area. It can move the rate slightly, but it is not something you can change, and it never outweighs age and health.

Gilt yields set the market level for everyone. Annuity providers fund the promised income mainly from UK government bonds, so when gilt yields rise, annuity rates rise with them. That is why rates jumped after 2022 and why they have stayed above 7% since. You cannot control gilt yields, but you can notice them: buying when yields are high locks in a high income for life.

The options you choose set the rest. A guarantee period, which keeps paying your estate or a beneficiary for five or ten years if you die early, lowers the starting income slightly. Payment frequency matters a little too: monthly in advance usually pays slightly less per year than annually in arrears, because the insurer pays out sooner. None of these is a trick; each is a price for a feature, and the comparison only works when you compare identical features across providers.

Defined benefit pensions, such as the NHS pension scheme, work differently: they promise an income based on your salary and years of service rather than a pot you convert. If you are in that kind of scheme, your retirement income does not come from buying an annuity at all. Our NHS pay calculator guide explains how NHS pension tiers affect take-home pay while you are working, and our NHS pay calculator works out the take-home figure itself.

How do you compare annuity quotes step by step?

Comparing annuities is a process, not a single search. Follow it in order, and do not skip the free guidance step: it exists precisely because this decision cannot be undone.

Step one: find out what you actually have. Ask each pension provider for a retirement pack, including your pot value, whether the policy contains a guaranteed annuity rate, and what annuity income they themselves offer. Write the pot values down. If you have several small pots, list them all; combining them into one annuity purchase can sometimes improve the rate.

Step two: take the 25% tax-free cash decision separately. You can usually take up to 25% of each pot tax-free, limited by the lump sum allowance of £268,275 across all your pensions for most people. On a £100,000 pot that is £25,000 tax-free, leaving £75,000 to buy the annuity, which at the top November 2026 single-life rate buys about £6,149 a year. Decide how much tax-free cash you actually need before you compare incomes, because every pound taken as cash is a pound that stops earning annuity income.

Step three: use MoneyHelper's free annuity comparison tool. MoneyHelper is the free, impartial money guidance service backed by the government, and its annuity comparison tool shows quotes from providers across the market for your age, pot size, health and options. Enter the same details everywhere: same pot after tax-free cash, same single or joint life, same escalation, same guarantee period. A quote that looks better because it quietly dropped the joint-life cover is not a better quote.

Step four: get at least three real quotes, including your own provider's. The November 2026 data shows a 22.3% spread between the best and worst single-life quote for the same person, and that spread is the money you keep or lose. Ask each provider for the quote in writing, with the income, the options, and the guarantee period stated. If a quote arrives without those details, it cannot be compared and should not be counted.

Step five: book a free Pension Wise appointment. Pension Wise is the free government guidance service from MoneyHelper for people aged 50 and over. It does not sell anything and does not recommend a product; it explains your options, including drawdown and lump sums, and checks you have not missed anything. Book it before you buy, not after you have signed.

Step six: check the tax position of each option before you commit. Annuity income is taxed as income in the year you receive it, and the worked example in the next section shows exactly how that lands. If you are still working, or you have other pension income starting in the same tax year, the combined total can push you into a higher band. Check your tax code before the first payment arrives, because the first payment is often taxed on an emergency code and the overpaid tax has to be reclaimed.

Step seven: buy once, and buy the right features. Confirm the annuity type, the escalation, the joint-life percentage, the guarantee period and the payment frequency in writing. Remember that a lifetime annuity whose income cannot go down does not trigger the Money Purchase Annual Allowance, so you can keep paying into a pension afterwards if you are still working — but taking taxable income from drawdown or lump sums does trigger it, cutting future tax-relieved contributions to £10,000 a year.

How much tax will you pay on your annuity income?

Annuity income counts as taxable income, just like a salary. It is paid through PAYE, so tax is usually deducted before the money reaches you, but the State Pension is paid gross and counts towards the same total. That combination catches people out: the full new State Pension alone is £241.30 a week in 2026/27, or £12,547.60 a year, according to GOV.UK, which sits just £22.40 below the £12,570 personal allowance. Add almost any annuity income on top and some of it becomes taxable.

Here is the worked example, done by hand from the GOV.UK 2026/27 bands and cross-checked against the arithmetic method of our own live tax tool, which we verified to the penny against the same GOV.UK rates on 12 November 2026. A healthy 65-year-old uses a £100,000 pot to buy a single-life level annuity at the top November 2026 rate of £8,198 a year, and also receives the full new State Pension.

Worked example, our own arithmetic, 14 November 2026. Rates: GOV.UK 2026/27 (personal allowance £12,570; basic rate 20% to £50,270); annuity rate from MoneyHelper data, 9 November 2026; State Pension from GOV.UK. England, Wales and Northern Ireland bands; assumes the full State Pension and no other income.

Two points in that table deserve attention. First, the annuity on its own would be tax-free: £8,198 is below the £12,570 personal allowance. It is the State Pension that uses up the allowance, so the annuity income is effectively taxed at 20% once the two are combined. Second, the tax bill is modest at this level — £1,635.12 on £20,745.60 — because most of the income sits inside the allowance. The picture changes if you have a defined benefit pension or rental income on top: once total income passes £50,270, the extra is taxed at 40%.

If you want to check a different income level, our £40,000 after-tax calculator uses the same 2026/27 bands — £40,000 of income gives £5,486.00 Income Tax and £2,194.40 National Insurance, leaving £32,319.60 a year — and our take-home pay guide explains the full calculation, including National Insurance, which does not apply to pension income after State Pension age. One practical warning: the first annuity payment is often taxed on an emergency code if the provider has no current tax code for you, which means too much tax is taken at first. It is repaid, but it is better to have the right code in place before the first payment.

How long do you need to live for an annuity to pay you back?

An annuity only beats keeping the capital if you live long enough. The breakeven is simple division: the pot divided by the annual income is the number of years before the insurer has paid you back more than you handed over. Our own arithmetic, from the November 2026 MoneyHelper rates for a 65-year-old with a £100,000 pot:

Breakeven, our own arithmetic, 14 November 2026, from MoneyHelper annuity calculator data correct at 9 November 2026. Illustrations, not forecasts: they ignore inflation, tax and investment growth, and the joint-life figure is for the household, since payments continue to the surviving partner.

The breakeven is not a prediction of how long you will live; it is a way of seeing the size of the bet. Buying the best quote instead of the worst moves the breakeven nearly three years earlier, from 14.9 years to 12.2 years. That is the same 22.3% spread from the rates table, expressed as years of your life. For a couple, the joint-life breakeven is softer than it looks, because the income continues to the survivor after the first death.

Compare that with drawdown. Taking the same £8,198 a year from a £100,000 pot left invested, with steady growth of 4% a year after charges, pays about 16 full years of income; at 5% growth it pays about 18 years. Those are steady-growth illustrations, not promises: a market fall in the first years shortens the period sharply, and that sequence risk is the real danger of drawdown. The annuity removes that risk entirely and replaces it with the opposite risk — dying early and leaving the insurer with most of the pot. A guarantee period softens that second risk: a ten-year guarantee means your estate or beneficiary keeps receiving the income for the rest of the ten years if you die early, at the cost of a slightly lower starting income.

Should you buy an annuity, use drawdown, or mix the two?

Most retirement guides present this as a choice between two doors. In practice, the best answer for many people is both, split by purpose: guaranteed income for the spending that cannot stop, flexible money for everything else.

Buy an annuity for the essentials. Add up the bills that cannot be cut — housing, food, energy, council tax. Say they come to £20,000 a year. The full new State Pension covers £12,547.60 of that, leaving a gap of about £7,452 a year to secure. At the top November 2026 single-life rate of £8,198 per £100,000, filling that gap costs about £90,900 of pot. Everything left over can stay in drawdown for holidays, help for family, and the unexpected.

Use drawdown for flexibility. Drawdown lets you vary the income year by year, take lump sums when you need them, and leave whatever remains to your beneficiaries. Before April 2027, an untouched drawdown pot usually passes outside your estate for Inheritance Tax; from 6 April 2027, most unused pension funds count towards the estate, under changes confirmed in Budget 2026. That change narrows one of drawdown's old advantages, and it is one more reason the annuity-versus-drawdown comparison done in 2024 no longer answers the question in 2026.

Watch the Money Purchase Annual Allowance if you are still working. Taking any taxable income from drawdown, or taking a lump sum where 75% is taxable, triggers it permanently and cuts the amount you can pay into a pension with tax relief from £60,000 a year to £10,000. Taking only the 25% tax-free cash does not trigger it, and neither does buying a lifetime annuity whose income cannot go down. If you plan to keep working and paying into a pension, take the tax-free cash first, buy the annuity if you are buying one, and only then touch taxable drawdown income.

Consider phasing it. You do not have to convert the whole pot on one day. Buying an annuity with part of the pot now and leaving the rest invested lets you benefit if rates rise later, and it keeps some flexibility. If you phase retirement by working part-time, remember your pension contributions fall with your pay — our pro-rata salary calculator shows what part-time pay looks like, and fewer contributions mean a smaller pot to convert later.

What mistakes cost annuity buyers the most money?

The expensive mistakes are all made before the purchase, and all of them are avoidable.

Taking the first offer. Your own pension provider's annuity quote is often not the best on the market. The November 2026 data shows a 22.3% gap between the best and worst single-life quote for the same person. Accepting the first offer without comparing is the single most expensive mistake on this list.

Hiding health conditions. Every undisclosed condition is income you give away. Enhanced annuities pay 6% to 15% more for common conditions, and the questionnaire takes minutes. Some buyers stay quiet because they think ill health should mean a worse deal; with annuities it means a better one.

Buying before checking for a guaranteed annuity rate. If your policy contains one, it usually beats the open market by a wide margin. It takes one phone call to ask, and skipping it can cost thousands a year.

Comparing different products. A quote for a single-life level annuity cannot be compared with a quote for a joint-life escalating annuity. Same pot, same age, same options, or the comparison is meaningless. Write the options down and check them off against each quote.

Ignoring the guarantee period. A single-life annuity with no guarantee period pays nothing more if you die the year after buying. A five- or ten-year guarantee costs a little income and protects your family from the worst outcome. For most buyers it is cheap insurance.

Forgetting tax. Annuity income plus the State Pension usually exceeds the personal allowance, so part of it is taxed at 20%. Budget on the after-tax figure, not the headline income. If you are still earning, extra hours can add to the pot you eventually convert, but they also add to the income that is taxed in that year.

Buying the whole pot at once without a reason. Annuities cannot be undone. Converting everything on the day you retire, when rates might rise or your health might change, throws away the option to decide again at 70, when the rate is higher by age alone.

When should you not buy an annuity?

An annuity is not the right answer for everyone, and saying so plainly is part of an honest comparison.

If you are in poor health with a short life expectancy, an annuity can still pay well through an enhanced rate — but if the prognosis is very short, taking the money as lump sums or leaving it in drawdown for your family may serve them better than an income that stops. Get guidance before deciding; this is exactly what Pension Wise exists for.

If your pot is small, the income may not be worth locking away. A £20,000 pot at the top single-life rate buys about £1,640 a year. Small pots of £10,000 or less can be taken as lump sums instead, up to three from personal pensions, without triggering the usual restrictions. That flexibility is often worth more than £1,640 a year.

If you need the capital — to clear a mortgage, to help children with a deposit, to pay for care — an annuity is the wrong tool, because the capital is gone. Drawdown or lump sums keep the money reachable.

If you expect to keep working and your income is high, think about timing. Buying an annuity while you are still a higher-rate taxpayer means the income is taxed at 40%. Waiting until you stop work can mean the same income is taxed at 20% or not at all. And if rates are low when you look, waiting a year or two has historically been rewarded: rates were near 4–5% before 2022 and above 7% after it. Nobody can promise they will stay high, but buying at a generational low without a reason is a choice worth questioning.

If you have a defined benefit pension that already covers your essentials, you may not need an annuity at all. The State Pension plus a defined benefit income can leave no gap to fill, and the rest of your defined contribution pot can stay flexible.

What should you do before you buy an annuity?

Work through this list in order, and do not sign anything until every box is ticked. Get your retirement pack from each provider, including the pot value, any guaranteed annuity rate, and their own annuity offer. Decide how much of the 25% tax-free cash you need, remembering the £268,275 lump sum allowance across all pensions. Compare identical quotes from at least three providers using MoneyHelper's annuity comparison tool. Disclose every health condition and lifestyle factor, and ask specifically about an enhanced rate. Book a free Pension Wise appointment and take your quotes with you. Work out the after-tax income, not the headline figure — the step-by-step calculation walks through the 2026/27 bands one line at a time. Check your tax code before the first payment so you are not overtaxed on an emergency code. Finally, confirm the annuity type, escalation, joint-life percentage, guarantee period and payment frequency in writing, and keep that letter with your pension paperwork.

Annuities reward the buyer who compares and punish the buyer who does not. The product itself is simple — guaranteed income for life — but the price of the same product varies by more than a fifth between providers, the right type depends on your health, your partner and your other income, and the decision cannot be reversed. Spend the time comparing. It is the highest-paid hour of work most retirees will ever do.

Your next step is to see what the income is actually worth after tax, with the same method used in this article, or browse all our pension and pay guides on our blog.