Should you delay buying an annuity until your seventies?
Annuity rates rise with age because the insurer expects to pay for fewer years, so deferring the purchase buys a higher rate. What it costs is the income not received in the meantime, and what it risks is the portfolio funding the gap being smaller when you finally buy.
- The gain: a materially higher rate at 75 than at 65, for the same money.
- The cost: the income forgone during the deferral, which is a large head start.
- The risk: a market fall shortly before purchase permanently reduces the income bought.
- The mitigation: de-risk the intended purchase money, or buy in tranches.
01 Why the older rate is higher
An annuity rate is income divided by premium, and the premium has to fund the expected stream of payments. A shorter expected period at an older age supports a larger annual amount from the same capital, and the step between 65 and 75 is substantial.
That is a mortality effect and it is independent of interest rates, which move separately. Waiting therefore buys a mortality gain and takes a bet on gilt yields at the same time — two things at once.
Health does the same thing more sharply and more quickly. A qualifying condition can produce at 65 a rate that waiting a decade would not reach.
Shows: the income given up during a deferral against the higher income secured afterwards. Ignores: investment returns during the deferral, inflation, tax, and any change in your health.
On the defaults above, the worked example shows £16,800 a year. Deferring gives up £130,000 of income and gains £3,800 a year — recovered after about 34 years of payments.
Source: MoneyHelper: guaranteed retirement income (annuities)
02 What funds the gap
Deferring means the portfolio funds the income the annuity would have paid. Ten years at £8,000 is £80,000 drawn from a pot that also has to buy the annuity at the end, so the strategy only works where the pot can carry both.
It also means the withdrawals happen in the years a fall does the most damage, which is the risk the whole plan has to survive. Someone deferring is running a heavier drawdown than a household that annuitised at the start.
The honest test is whether the plan still works if markets are poor for the first five years. If the answer is that the annuity would then be much smaller, the deferral is a leveraged bet rather than a patient one.
Source: Retirement income market data
03 De-risking the purchase money
Money earmarked to buy an annuity in five years is a known future expenditure, and it should be treated like one. Holding it in equities until the purchase date means a 30% fall shortly beforehand permanently reduces the income for the rest of your life.
The alternatives are to hold the intended premium in shorter-dated assets as the date approaches, or to buy in tranches so no single purchase date carries the whole decision. The second also spreads the interest-rate risk.
Neither is free — de-risking gives up expected return, and phasing gives up part of the mortality gain. Both are cheaper than discovering the answer in the wrong market, which is the same reasoning that puts more bonds around a known date rather than across a whole retirement.
Source: Bank Rate and how it works
Waiting buys a better rate and it is not free money — you are giving up a decade of income and asking the portfolio to fund it, in exactly the years a bad market does the most damage. The part people get wrong is what the intended premium is invested in while they wait. If you know you will buy an annuity at 75, that money is a known future purchase, and holding it in equities until the day means a bad year immediately beforehand cuts your income for life. Move it toward shorter-dated assets as the date approaches, or buy in two or three tranches and stop trying to pick the date.
FAQ
How much higher is the rate at 75?
Substantially, because the insurer expects to pay for fewer years. The exact step depends on the mortality assumptions and on the shape bought, and adding a spouse's benefit narrows it.
What funds my income while I wait?
The portfolio, which has to cover the deferred income and still buy the annuity at the end. That is a heavier drawdown in the years a market fall does the most permanent damage, which is the main risk in the strategy.
How do I protect the purchase?
Treat the intended premium as a known future expenditure and move it toward shorter-dated assets as the date approaches, or buy in tranches so no single date carries the whole decision. Both cost something, and both cost less than a poor market on the day.
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
- Retirement income market data · Financial Conduct Authority · 2025What UK savers actually do at retirement, measured rather than assumed.Last verified: 2026-09-07
- 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
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.