Annuity rates

Annuities can be a great way to secure a stable income for your retirement. But how much you’ll receive in each annuity payment depends on the rate you’re offered. Annuity rates change regularly as market conditions shift, and they can vary between providers.

Read on to find out what annuity rates are, the factors that influence them and how to get the best rate for your circumstances.

What is an annuity rate?

An annuity rate determines how much income you’ll get from your annuity each year. It shows your annual income as a percentage of your original investment.

Let’s say you have £100,000 to put into an annuity, either from your pension pot or savings. The amount you’ll get in your annuity payments will depend on the rate of the annuity you buy.

Here’s how different annuity rates could affect your annual income from a £100,000 annuity:

The 3%, 5% and 7% rates shown are examples to illustrate how annuity rates work, they’re not offers or quotes. Your actual rate will depend on your personal circumstances. These are examples to show how rates work. To see what you could receive, get a personalised quote based on your circumstances.

What’s the current annuity rate?

There isn’t a single annuity rate – the rate an annuity provider offers you will be based on various factors, which we’ll explain below. However, annuity rates follow market trends, and in the UK, they’ve been rising in recent years.

What affects annuity rates?

Your annuity rate and therefore your income, depends on several different factors. Some are outside your control, like interest rates. Others relate to your personal choices and circumstances, such as your age, health, and which provider and type of annuity you choose.

How interest rates affect annuity rates 

When you buy an annuity, your provider usually invests the money in government bonds, which are considered very safe investments. When interest rates rise, new bonds offer higher returns. This means providers can afford to pay more income - so annuity rates tend to be higher too.

How can I get the best annuity rate?

The best annuity rate is the one that suits your specific circumstances, needs and goals. Here are the key factors that will influence what rate you can get, and how to think about what's right for you:

Your age
Annuity rates are usually higher the older you are when you buy one. However, if you need the income as soon as you retire, buying an annuity at a younger age with a lower rate might make more sense for you.

Your health and lifestyle
Some health conditions and lifestyle factors, like heart problems, cancer, smoking or being significantly overweight may mean you qualify for a higher annuity rate. This is called an Enhanced Annuity. It simply reflects that your provider may expect to pay your income for a shorter time, so they can offer you more each year.

When you buy our Lifetime Annuity, you’ll have the chance to tell us about any current or past health issues to see if you qualify for an Enhanced Annuity.

The type of annuity
You can choose an annuity with a fixed rate that stays the same, or one that increases over time. What’s right for you depends on whether you’d prefer a higher income to start with, or an income that grows in the future.

With our Lifetime Annuity, you can opt for a fixed or escalating rate.

The provider
Annuity providers offer different annuity rates, so it's worth shopping around to see which is right for you. But don't just focus on the headline rate. It's also worth thinking about how stable the provider is, their service reputation, and whether they offer the features you need.

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