What income would a £100,000 pot buy as an annuity at 65 or 70?
Annuitising later buys a higher rate, because the insurer expects to pay for fewer years. The uplift between 65 and 70 is real, and so is the cost: five years of income forgone, which the higher rate has to recover before the later start is ahead.
- Why the rate rises: fewer expected payments at an older age, so more income per £100,000.
- What it costs: the payments not received during the deferral, which is a large fixed head start.
- The crossover: usually well into the eighties, close enough to life expectancy to be a real judgement.
- The other variable: what the money does during the deferral, and what it is exposed to.
01 Why the older rate is higher
An annuity rate is income divided by premium, and the premium has to cover the expected stream of payments. A 70-year-old has a shorter expected payment period than a 65-year-old, so the same £100,000 supports a larger annual amount. That is the whole mechanism, and it is independent of interest rates.
The size of the step depends on the mortality table and on the shape bought. Adding a spouse's benefit shrinks the gap, because the second life is doing much of the work and its expected duration has not shortened as much.
Health does the same thing more sharply. A 65-year-old with a qualifying condition can be quoted a rate that a healthy 70-year-old would not reach, which is why disclosure often matters more than waiting.
Source: MoneyHelper: guaranteed retirement income (annuities)
02 The head start you give up
Deferring from 65 to 70 forgoes five years of payments, and that is a fixed amount received early rather than a percentage. On a £100,000 pot at a 6.5% rate it is around £32,500 of income not received, and the higher rate at 70 has to make that up before the later start is ahead in cumulative terms.
The crossover typically arrives well into the eighties. Cohort life expectancy at 65 sits in the mid-eighties, which places the decision close to the middle rather than obviously one way — the same uncomfortable symmetry that makes State Pension deferral a genuine judgement.
What tips it is usually not longevity but need. Someone who requires income at 65 has no decision to make; someone who does not can consider it.
Shows: the income a pot buys at each age, and the age at which the later purchase catches up in total payments received. Ignores: investment return during deferral, inflation, tax, and the shape of the annuity.
On the defaults above, the worked example shows £7,800 a year. The later start pays £1,300 a year more but begins £32,500 behind, catching up after about 25 years of payments.
Source: National life tables, UK
03 What the money does meanwhile
Deferring means the pot stays invested and exposed for five more years, which is the part the rate comparison leaves out. Good markets make the later purchase better than the rate difference alone suggests; a poor sequence makes it worse, and the loss is permanent because the annuity is bought with what is left.
That asymmetry argues for de-risking as the intended purchase date approaches, in the same way as any other known future expenditure. It also argues for phasing: buying part of the income at 65 and part at 70 hedges both the mortality gain and the market risk.
The other option during deferral is drawing from the pot, which reduces the amount available to annuitise. That is a coherent plan and it changes the comparison entirely, since the two paths no longer start from the same premium.
Source: Plan your retirement income
Framed as a rate comparison this looks like a puzzle; framed properly it is a funding question. If you need the income at 65, you buy at 65 and the higher rate at 70 is not available to you. If you do not need it, the real question is what the money is doing for those five years and whether you are comfortable with it being exposed to markets right up to the purchase date. My answer for most people is to split it — annuitise enough at 65 to cover the essential bills, leave the rest invested, and buy the second tranche later. That takes the timing decision off the table without pretending you can forecast rates.
FAQ
How much higher is the rate at 70 than at 65?
Enough to matter, but the exact step depends on the insurer's mortality assumptions and on the shape bought. Adding a spouse's benefit narrows the gap, because the second life's expected duration has not shortened as much.
When does deferring break even?
Typically well into the eighties, because the payments forgone during deferral are a large fixed head start. That is close to cohort life expectancy at 65, which makes the decision a genuine judgement rather than an obvious one.
What should the money do while I defer?
Whatever it does, it is exposed. A poor market sequence immediately before the purchase permanently reduces the income, so de-risking toward the intended purchase date — or phasing the purchase across the period — is the usual response.
Sources
Regulator references
- MoneyHelper: guaranteed retirement income (annuities) · MoneyHelper · 2025The government-backed explanation of annuity shapes and the options priced into them.Last verified: 2026-09-07
- National life tables, UK · Office for National Statistics · 2023Cohort life expectancy at 65, which sets the planning horizon here.Last verified: 2026-09-07
- Plan your retirement income · GOV.UK · 2025The government's own sequence for turning pension pots into income.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.