Annuity sales will likely continue to rise in 2026.
Volatility in global markets might persuade more people to opt for a guaranteed income at retirement rather than staying invested in the stock market.
Here, Which? outlines why annuities are likely to remain an attractive option this year and whether they’re suitable for you.
Why are annuities proving popular?
Buying an annuity involves swapping your pension savings for a guaranteed regular income that will last for the rest of your life.
Annuity sales have risen over the past couple of years, driven by high interest rates, which have boosted annuity rates, and some uncertainty in the investment markets.
Current geopolitical tensions worldwide and concerns about the UK economy may push more people towards the assurance of annuities.
There were 88,430 new sales of annuities in 2024-25, and purchases may exceed 100,000 this year for the first time in a decade.
Annuity companies consider the broader economic picture, as well as your personal circumstances, when deciding how much money you’ll get from your annuity.
You don’t have to use your entire pot to buy an annuity. Some of your pension funds can go towards it, while the rest can remain invested in pension drawdown with the potential to grow further.
Putting off a purchase for a while can also prove beneficial. You’ll generally find that the older you are when you arrange an annuity, the higher the rate you’ll get. This reflects the fact that the annuity provider won’t have to pay out for as long.
What happened to rates in 2025?
Exactly how much income you’ll get depends on the quote or annuity rate that you receive from the annuity provider (given as a percentage, for example 6% of your fund a year) and the amount you’re converting into an annuity (your initial pension pot).
Companies typically fund these products using returns from government bonds (known as gilts), which are considered low-risk investments. When the base rate is high, gilt yields tend to inflate, which in turn pushes up annuity rates.
The Bank of England cut the base interest rate on four occasions in 2025 (in February, May, August and December). The rate was reduced by 0.25% each time, falling from 4.75% to 3.75% over the year.
However, other global factors (such as stubborn inflation and governments issuing more debt) kept gilt yields high last year. Interest rate cuts in 2025 haven’t significantly suppressed annuity rates.
Our table shows how much a healthy 65-year-old could get in return for a pot worth £100,000 in 2025. Rates rose until June 2025, before dipping slightly in the second half of the year.
Source: Figures are based on a person living in a CB23 postcode receiving payment annually in arrears, and are to be used as a guide only.
- Find out more: best annuity rates 2026
How to get the best annuity rate in 2026
Rates may drift further downward in 2026 if there are more interest rate cuts.
Buying an annuity means you can’t reverse the process, so it’s important to take the time to choose the right deal for you.
The best annuity rate on offer in January 2026 for a healthy 65-year-old with an initial pension pot of £100,000 is £7,649 a year, which is 8% higher than the lowest rate (£7,100).
Opting for the lowest rate could mean you lose out to the tune of £549 a year, or an extremely significant £13,725 over the course of a 25-year retirement.
People in poor health, who smoke or are overweight, may be eligible for an enhanced annuity. This pays a higher income based on a shorter life expectancy.
Quotes obtained by Which? Money in 2025 for a 65-year-old in relatively poor health, with a £100,000 pension pot, showed that an enhanced annuity paid between 6% (Legal & General) and 15% (Aviva) more than a standard annuity.
- Find out more: what are annuities?
How to choose an annuity
Financial Conduct Authority (FCA) data show that only 29% of those who arranged an annuity in 2024-25 took regulated financial advice.
You should get regulated advice or some support if you aren’t confident making a decision on your own.
- You can find a financial adviser via a comparison site. Unbiased is a free-to-use service that can connect you with independent, FCA-regulated financial advisers. Similarly, VouchedFor is a directory of verified advisers with reviews from real clients.
- An independent annuity broking service, such as Retirement Line or HUB Financial Solutions, can work on your behalf to find the best deal and most suitable product for your circumstances.
- There’s also free guidance from Pension Wise. This service, from government-backed MoneyHelper, offers face-to-face, telephone or online appointments to over-50s with a defined contribution pension.
Find out more: how to get pension advice and guidance for your retirement