Compare annuity rates (checked May 2024)

Annuity rates are currently at some of their highest levels we have seen for many years, with a healthy 65 year old able to achieve an annuity rate of around 7.4% guaranteed for life.

For example, in January 2022, a 65 year old retiring with a pot of £78,500, would have achieved an annual income of £2,914 with the best annuity rate, after taking the 25% tax free cash sum and investing the remaining £58,875.  In May 2024 this same customer could achieve an annual income of £4,374 with the best annuity rate - an increase of 66%.

Please bear in mind that, like interest rates, annuity rates fluctuate over any given period of time. So when applying for an annuity, it’s worth getting a new quote at the last minute to ensure you're getting the best rate possible.

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Current annuity rates as at 10.01.24

This table shows annual annuity income from a £100,000 pension pot.  

Annuity options Age 55 Age 60 Age 65 Age 65 smoker Age 70 Age 75
Single life, level, no guarantee £5,848 £6,177 £6,766 £7,462 £4,480 £8,753
Single life, level, 5 year guarantee £5,844 £6,171 £6,735 £7,398 £7,398 £8,600
Single life, RPI, 5 year guarantee £3,391 £3,760 £4,310 £4,976 £5,055 £6,346
Single life, 3% escalation, 5 year guarantee £3,913 £4,294 £4,859 £5,558 £5,622 £6,834
Joint life 50%, level, no guarantee £5,617 £5,958 £6,352 £6,764 £7,043 £8,204
Joint life 50%, 3% escalation, no guarantee £3,681 £4,505 £4,505 £4,921 £5,158 £6,327

Current UK annuity rates are high, thanks to strong gilt yields and a rise in interest rates. Whilst higher interest rates have sent mortgage costs and everyday expenses spiralling, today’s annuities are more financially rewarding and therefore more appealing to those about to retire.

Annuity providers typically buy government bonds or gilts as they are also known to generate a return on your investment. The higher the interest rate, the greater the return which could be an attractive option for retirees looking for the security and stability of an annuity.

How to find the best annuity rate for you

Your choice of annuity will affect your income for the rest of your life, so it’s important to get the best annuity rate on the type of annuity that best suits your situation. That’s why it's worthwhile getting advice from a specialist pension adviser like Age Partnership as they can compare a range of providers to find the best annuity and the best rate based on your circumstances and requirements, both current and future.

Age Partnership also guarantees to beat any like-for-like annuity quote, or they'll give you £100.

You could also get free impartial guidance from Pension Wise, a service offered from government-backed MoneyHelper.

 

 

How are annuity rates calculated?

Annuity rates are calculated based on a number of factors including:

1. Current interest rates

Your annuity is funded in part by the interest earned on your money while it is invested. The higher the bank base rate (5.25% in March 2024), the higher interest rates and annuity rates are.

2. Gilt yields

Annuities are also partly funded by gilts, which are government bonds. This means that the income paid by an annuity is linked to the yield generated from these gilts. The higher the gilt yield the higher annuity rates and vice versa.

3. Your estimated life expectancy

A pension annuity guarantees you an income for life, however long that may be. So a healthy person in their late 50s is likely to live a long life and need more income than someone who is older, in poor health, or both.  This principle is reflected in the pension annuity rate you’re offered. In other words, the longer your life expectancy, the lower your annuity rate and vice versa.

4. Your health and lifestyle

If you’re in poor health or a smoker, or you engage in any other lifestyle activity that could potentially shorten your life, you could get an enhanced annuity at a better rate that could amount to as much as 30% more income.

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What else can affect annuity rates?

Annuity rates can vary widely between providers and the rate you're offered can be affected by a range of factors, including specific features of the annuity you choose, such as:

  • Joint cover for you and your partner
  • An arrangement to ensure your pension income will continue to be paid to someone else after your death
  • Whether you want your income to remain at the same level for life or would prefer it to rise each year to protect you against inflation.

Because of the different offerings from providers, you may find that some will produce much more income for you than others over the duration of your retirement.

 

 What is a guaranteed annuity rate?

A guaranteed annuity rate (GAR) is a rate set at the outset of your pension plan, so it is likely to be much higher than the rates offered today.

According to unbiased.co.uk with-profits pensions taken out before 1988 are most likely to have a GAR, so if you have this type of pension, check your policy documentation carefully or ask your provider.

What is an enhanced annuity rate?

As the name suggests, an enhanced annuity rate offer more than a standard annuity rate. 

Standard annuity rates are based on limited information such as your age, how much your pension pot is worth, where you live, any tax-free cash you've already withdrawn and any options you have added to your annuity, such as index linking your income. Whereas enhanced annuity rates are based on more personal and detailed information about your lifestyle and health.

The annuity provider factors in the likelihood of a particular event occurring. So if you have health issues or have made lifestyle choices that could shorten your life, they will consider you a higher risk and offer you a higher (enhanced) annuity rate, which in turn will give you a higher pension income.

Will a smoker get a better annuity rate?

Yes, as a smoker you’ll qualify for an enhanced annuity and get a higher annuity rate than a non-smoker with the same size pension pot.

If you have a smoking-related condition such as COPD, your annuity rate could be enhanced further, as your ill health would be considered on top of the enhanced rate you get for being a smoker.

best annuity rates

Speak to the annuity and pension income experts

Age Partnership’s annuity calculator is a good starting point for finding out how much more retirement income you could get.

Then why not talk to the team at Age Partnership about annuities? Their experts will answer any questions, search the whole of the market for the best annuity rates and help you make the right decision when the time comes.

Age Partnership are so confident they can find you the best annuity deal that they will even give you £100 if you find a better like-for-like annuity quote.

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