Should you buy your annuity in stages rather than in one purchase?
An annuity purchase fixes one day's gilt yields for the rest of your life, which is an unusual amount of weight to put on a single date. Buying in two or three tranches across a decade spreads that risk and captures the higher rates that come with age, at the cost of some complexity and slightly worse pricing on smaller amounts.
- The risk removed: the whole purchase resting on one day's gilt yields.
- The gain kept: rates rise with age, so later tranches are priced better.
- The cost: smaller purchases can attract slightly worse terms and more administration.
- The flexibility: health can change between tranches, and a later one can be enhanced.
01 What phasing removes
An annuity rate is set by the gilt market on the day you buy, and it is fixed for life. That makes a single purchase an unhedged bet on one date, and nothing about retirement planning otherwise concentrates so much on a single moment.
Buying in tranches averages the rates you lock in, in the same way regular investing averages a purchase price. It does not improve the expected outcome; it narrows the range of outcomes, which is the point.
It also removes the need to have a view. Buying now requires believing rates will not improve; waiting requires believing they will. Phasing requires neither, which is why the timing question largely disappears.
Shows: the income from a single purchase against the average of two purchases at different rates. Ignores: the mortality gain on the later tranche, pricing on smaller amounts, and inflation.
On the defaults above, the worked example shows £14,760 a year. Buying it all today gives £15,600; splitting it across the two rates gives £14,760 — the point is the narrower range, not the higher number.
Source: Bank Rate and how it works
02 What phasing keeps
Annuity rates rise with age because the expected payment period shortens. Later tranches therefore attract better terms for reasons that have nothing to do with markets, and that mortality gain is captured without deferring the whole purchase.
Health can also change between tranches. A condition that develops in the intervening years qualifies the later purchase for an enhanced rate, which a single early purchase would have missed entirely.
And the portfolio funding the gap is smaller than under a full deferral, so the sequence risk on it is lower than a strategy that waits for everything.
Source: MoneyHelper: guaranteed retirement income (annuities)
03 The costs
Smaller purchases can attract slightly worse pricing, and each one involves its own quotation exercise and paperwork. Three tranches means shopping the open market three times, which is the correct thing to do and is real work.
There is also a coordination cost: the shape of each tranche has to be decided separately, and it is easy to end up with a mismatched set. Deciding the whole structure once and executing it in stages avoids that.
Neither cost is large next to the risk being removed, which is why phasing is the default recommendation for anyone annuitising a substantial amount rather than a small one.
Source: Retirement income market data
Buying an annuity in one go puts your entire retirement income on one day's gilt market, which is more concentration than anyone would accept anywhere else in a plan. Two or three tranches across a decade averages the rate you lock in and picks up the mortality gain that comes with age, and it means you never have to have a view about where yields are going. That is the real benefit: not a better expected outcome, but a decision you can make without a forecast.
FAQ
Does phasing produce a better income?
Not on average. It narrows the range of outcomes rather than raising the expected one, which is the point — a single purchase fixes one day's gilt yields for the rest of your life.
Does it cost more?
Slightly. Smaller purchases can attract marginally worse pricing and each tranche involves its own quotation exercise. Neither cost is large next to the concentration risk being removed.
Do later tranches get better rates?
Usually, for two reasons that have nothing to do with markets: rates rise with age as the expected payment period shortens, and any health condition developing in the meantime can qualify a later purchase for an enhanced rate.
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
- 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
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.