What annuity rate could you get today, and what moves it?
An annuity rate is the annual income an insurer will pay for each £100,000 of pension money, and it is set by three things: long gilt yields, your age, and your health. Two of those you cannot influence today, which is why the open market option and full medical disclosure matter more than waiting for a better week.
- The driver: insurers back annuities with gilts, so long yields set the base rate.
- Your age: a later start means fewer expected payments and a higher rate.
- Your health: declared conditions can raise the rate materially through an enhanced annuity.
- The controllable bit: the open market option — you are not obliged to buy from your pension provider.
01 Where the rate comes from
An insurer selling you a lifetime income has to back it with assets that pay reliably for as long as you live, and long-dated gilts are the natural match. That is why annuity rates track long gilt yields closely: when the yield on a fifteen or twenty year gilt rises, the income an insurer can promise for the same premium rises with it.
The rest of the calculation is mortality. The insurer prices how long it expects to pay, using your age, sex where permitted, postcode and declared health. A 70-year-old is quoted a higher rate than a 65-year-old for the same money, not because the investment is better but because there are fewer expected payments.
The published rate you see quoted in the press is usually for a single-life, level, no-guarantee annuity for a healthy person at 65. Almost nobody buys exactly that, and every feature you add — a spouse's pension, inflation-linking, a guarantee period — reduces the starting income.
Shows: the annual income a pot buys at the rate you enter, and what the same pot buys if you find a rate one percentage point better. Ignores: tax on the income, inflation, the shape of the annuity, and whether you qualify for an enhanced rate.
On the defaults above, the worked example shows £13,000 a year. A rate one point higher would pay £15,000 a year — £2,000 more, every year, for life.
Source: Bank Rate and how it works
02 The open market option
You are not required to buy your annuity from the provider holding your pension, and the gap between the best and worst quotes on the same money is routinely double-digit percentages. The right to shop around is the open market option, and it is the single largest controllable factor in the rate you end up with.
The regulator's own market data shows a meaningful share of annuities still bought from the existing provider without comparison. That is a permanent decision made on a default, and unlike an investment choice it cannot be revisited: an annuity purchase is final.
Comparison has to be like-for-like. A quote with no spouse's pension against one with 50% is not a comparison of rates; it is a comparison of products. Fix the shape first — single or joint, level or escalating, guaranteed or not — then compare on price.
Source: Retirement income market data
03 Timing, and why it matters less than it feels
Waiting for rates to improve is a bet on gilt yields, and it costs you the income you did not receive while waiting. A year of deferral at a 5% rate on a £200,000 pot forgoes £10,000, which a modestly better rate takes many years to recover.
Age works in your favour while you wait, and that effect is real and predictable. But it is largely offset by the payments given up, which is why delaying to a later age is a decision about how you fund the intervening years rather than a free upgrade.
What is genuinely worth waiting for is a diagnosis or a condition being properly recorded. An enhanced annuity based on declared health can raise the rate by a margin no amount of market timing reliably delivers.
Source: MoneyHelper: guaranteed retirement income (annuities)
The instinct with annuities is to time the purchase, and it is the least productive place to spend your attention. Gilt yields will do what they do. What you actually control is whether you take the first quote your provider sends, and whether you tell the underwriter about the blood pressure medication you have been on for six years. I have seen both of those move the income by more than a whole percentage point of yield. Fix the shape, disclose everything, then compare — and treat the date as a detail rather than the decision.
FAQ
Why do quotes differ so much between providers?
Insurers price mortality and their own capital differently, and they are not all competing for the same customers. The spread between the best and worst quote on identical terms is routinely double digits in percentage terms, which is why the open market option matters.
Should I wait for annuity rates to improve?
Waiting costs you the income you do not receive meanwhile, which a better rate takes years to recover. Ageing raises your rate predictably, but it is largely offset by the payments forgone — so deferral is a funding decision about the gap years, not a free upgrade.
Does the quoted headline rate apply to me?
Usually not. Published rates are typically for a single-life, level annuity with no guarantee for a healthy 65-year-old. Adding a spouse's pension, inflation-linking or a guarantee period reduces the starting income, and declared health conditions can raise it.
Sources
Regulator references
- Bank Rate and how it works · Bank of England · 2025The policy rate that drives the mortgage and cash comparisons here.Last verified: 2026-09-07
- Retirement income market data · Financial Conduct Authority · 2025What UK savers actually do at retirement, measured rather than assumed.Last verified: 2026-09-07
- MoneyHelper: guaranteed retirement income (annuities) · MoneyHelper · 2025The government-backed explanation of annuity shapes and the options priced into them.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.