Annuity Calculator
How it works
An annuity rate is set by the provider based on long-dated gilt yields, your age, life expectancy and any chosen options (escalation, joint life, guarantee period). Higher rates = more income per £ of pot.
2025 annuity rates are at their best for over a decade because gilt yields are higher. A 65-year-old can typically get ~£6,500-£7,000/year per £100k for a level single-life annuity.
Worked example
£150,000 pot, age 65, level single-life with 5-year guarantee:
- Rate ~6.8% → £10,200/year (£850/month) for life
- RPI-linked equivalent: ~£6,900/year starting, rising with inflation
- Joint life (50%): ~£9,300/year
Who should use this
- •Anyone wanting guaranteed income in retirement
- •Risk-averse retirees over 65
- •People wanting to insure against living a long time
- •Drawdown users converting later in retirement
Common mistakes
- ×Taking the default annuity from your pension provider without shopping around (Open Market Option can add 10-20%)
- ×Not declaring health conditions — enhanced annuities pay more
- ×Choosing level when you have 25+ years to live
- ×Forgetting joint life if your spouse depends on the income
Frequently asked questions
Are annuity rates better than they used to be?▾
Yes — 2025 rates are at the best level for over a decade because of higher gilt yields.
Is annuity income taxable?▾
Yes — taxed as income at your marginal rate. The 25% tax-free lump sum should be taken from the pot before purchase.
Can I cancel an annuity?▾
There's a 30-day cooling-off period. After that, it's irreversible.
What's an enhanced annuity?▾
A higher rate offered to people with shorter life expectancy due to health (smoker, diabetes, high BP, etc.) — can boost income 10-30%.
Can my spouse inherit the annuity?▾
Only if you bought a joint-life version. Single-life annuities die with you (subject to any guarantee period).