Blog · Annuities
How much annuity does £100,000 buy?
An annuity swaps some or all of your pension for a guaranteed income for life. Here is exactly what £100,000 buys at today's rates, which type of annuity to choose, and how it compares with keeping the money invested.
The short answer
At 65, the best rate on the market on 8 October 2026 turned £100,000 into £8,172 a year (£681 a month) for life, fixed. An income that rises with inflation starts lower, at £5,564 a year (£464 a month). You get more the older you are - £10,113 at 75 - and more again if you smoke or have health conditions.
- fixed income for life from £100,000 at 65
- £8,172 a year
- the same pot, with an income that rises with inflation
- £5,564 a year
- fixed income if you buy at 75 instead
- £10,113 a year
- for a fixed annuity at 65 to pay back the £100,000
- 12 years
Try it with your numbers
Compare it with keeping the money invested
Prefilled with £100,000 from 65, drawing £464 a month - what an inflation-linked annuity pays - with the State Pension turned off so you see the pot on its own. Watch when the money runs out, then change any number to match your own plan. Nothing you enter leaves your browser.
Your numbers
Prefer the full page? Open the pension drawdown calculator.
What £100,000 buys at every age
An annuity pays a set income for the rest of your life in exchange for your pension pot. How much depends mainly on your age and the type of income you choose. Here is what £100,000 bought on 8 October 2026, as a yearly income before tax.
| Age | Fixed | Inflation-linked | Couple |
|---|---|---|---|
| 55 | £7,078 | £4,451 | £6,665 |
| 60 | £7,476 | £4,884 | £7,144 |
| 65 | £8,172 | £5,564 | £7,658 |
| 70 | £8,907 | £6,336 | £8,325 |
| 75 | £10,113 | £7,553 | £9,062 |
Hargreaves Lansdown's best-buy quotes for an average postcode, paid monthly in advance. "Fixed" stays the same for life, with no guarantee period. "Inflation-linked" rises each year with RPI (the Retail Prices Index, a measure of inflation) and includes a five-year guarantee. "Couple" is fixed and pays half to a spouse three years younger after you die.
The older you are, the more you get, because the insurer expects to pay you for fewer years. Buying at 75 rather than 65 adds £1,941 a year to a fixed income. That is not free money: you give up ten years of income in the meantime, and the rate you get at 75 depends on interest rates then, not now.
Rates change every week
Annuity rates move with interest rates, so these figures are a snapshot from 8 October 2026. Your own quote will also depend on your postcode, your health and the options you pick. MoneyHelper's free annuity comparison searches live rates from every provider, and its annuity guide explains the options.
Fixed or rising: which income to choose
A fixed (level) annuity pays the most at the start but never goes up. One that rises with inflation starts 32% lower but keeps its buying power for life. Which pays more overall depends on how long you live and how fast prices rise.
what a fixed £8,172 buys after 20 years
£4,987
If prices rise 2.5% a year, a fixed income of £8,172 buys only £4,987 of today's shopping by age 85.
when the inflation-linked income overtakes the fixed one
Year 17
At age 81, assuming RPI rises 2.5% a year. Before then the fixed annuity pays more each year.
when the inflation-linked one has paid more in total
Age 96
After 31 years at 2.5% inflation. If RPI runs at 3.5% instead, it takes 22 years.
A third option rises by a fixed 3% a year: it starts at £6,094, overtakes the fixed income in year 11 and has paid more in total after 20 years.
The ONS expects a 65-year-old woman to live another 21.2 years and a man another 18.7 (2022 to 2024). Those are averages, so many people live well past them. A rising income protects you against high inflation and a very long life, but at 2.5% inflation the fixed one pays more in total unless you live past about 96. If your health is poor, or you want more to spend in your active early years, a fixed annuity may suit you better.
Your State Pension already rises each year by at least inflation (the triple lock), so it gives you some protection even if your annuity is fixed. That can make a fixed annuity alongside the State Pension a reasonable mix.
Annuity or drawdown?
The alternative to an annuity is drawdown: keeping your pot invested and taking money out as you need it. Assuming 5% growth a year before 2.5% inflation and 0.4% fees, £100,000 drawn down from 65 supports about £370 a month in today's money until 95. The inflation-linked annuity pays £464 a month for life.
| Option | Monthly income | How long it lasts |
|---|---|---|
| Inflation-linked annuity | £464 | For life |
| Drawdown, Balanced (5% growth) | £370 | To age 95 |
| Drawdown, Balanced, planned to 100 | £332 | To age 100 |
| Drawdown, Cautious (3% growth) | £281 | To age 95 |
Drawdown figures from our engine: 2.5% inflation and 0.4% fees, spending the pot to zero at the age shown. The annuity is Hargreaves Lansdown's best inflation-linked rate on 8 October 2026.
At today's rates the annuity pays £94 a month more than drawdown before tax, and it keeps paying if you live past 95. That is because an insurer spreads the cost of long lives across everyone it pays. Tax narrows the gap, because drawdown can take a quarter of each withdrawal tax free: alongside a full State Pension, the annuity leaves about £372 a month after tax against £315 from drawdown. Drawdown still has real advantages - you keep control, you can change what you take, and whatever is left when you die can go to your family (though from 6 April 2027 it can count for inheritance tax, and if you die after 75 they pay income tax on it) - but you keep the investment risk and the risk of living a long time.
An annuity insures you against living a long time. With drawdown, that risk stays with you.
You do not have to choose one or the other
Many people use part of their pot to buy an annuity that covers essential bills, and keep the rest invested. Together with the State Pension, the annuity makes sure the basics are paid for life, whatever happens to markets.
A 70-year-old who needs £1,500 a month for essentials
About £107,000 of pension to cover the rest
The full State Pension pays £1,046 a month, leaving £454 a month of essentials uncovered. The State Pension uses up the tax-free personal allowance, so the annuity is taxed from its first pound and needs to pay about £6,804 a year before tax. At 8 October 2026 rates an inflation-linked annuity bought at 70 pays £6,336 a year per £100,000, so covering the gap for life costs about £107,000 of pension. Anything else can stay invested for holidays, gifts and the unexpected.
You can also buy in stages: an annuity with part of the pot at 65, and another later, when you get more per pound because you are older. Each purchase is permanent, but you do not have to make the whole decision at once.
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What other pot sizes buy
Annuity income scales roughly in line with the pot, so you can work out your own figure from the £100,000 rates. Here is what different pots bought at 65 on 8 October 2026.
| Pot | Fixed, a month | Inflation-linked, a month |
|---|---|---|
| £50,000 | £341 | £232 |
| £100,000 | £681 | £464 |
| £200,000 | £1,362 | £927 |
| £300,000 | £2,043 | £1,391 |
| £500,000 | £3,405 | £2,318 |
Scaled from the £100,000 quotes. Larger pots sometimes get slightly better rates, and very small pots slightly worse.
If you take your 25% tax-free cash first, you have £75,000 left to buy the annuity, which at 65 pays about £6,129 a year fixed. Our guides to £200,000, £250,000 and £400,000 compare the annuity with drawdown for each pot.
How to get a better rate
- Check for a guaranteed annuity rate first. Some older pension policies come with a guaranteed rate that can pay far more than today's market. Ask your provider before you do anything else.
- Shop around. Otherwise, you do not have to buy from your pension provider. Comparing quotes across insurers is free and often pays more for exactly the same annuity.
- Tell the insurer about your health. Conditions like high blood pressure or diabetes, smoking, or being overweight can get you an "enhanced" annuity. A 65-year-old smoker was quoted £8,715 a year against £8,172 for a non-smoker - 7% more.
- A guarantee period costs little. A five-year guarantee, which keeps paying your family for the rest of the five years if you die early, reduced the fixed income at 65 only from £8,172 to £8,138.
- A joint annuity protects a partner. Paying half to a spouse after you die cost £514 a year at 65 - 6% less income - so your partner keeps half your income instead of losing all of it.
Tax on annuity income
Annuity income is taxed like a salary. The insurer takes the tax off before paying you, using your tax code.
Because the full State Pension of £12,548 a year uses almost all of the £12,570 personal allowance, almost every pound of annuity income on top of it is taxed. A fixed annuity of £8,172 a year alongside a full State Pension costs about £1,630 a year in income tax at 2026/27 rates, or £136 a month. Bought at 65 with no other income, a fixed annuity of £8,172 is tax free until your State Pension starts at 67, because it fits inside the allowance.
Who actually buys annuities
Of the 961,575 pension plans accessed for the first time in 2024/25, plans of £50,000 to £99,999 were the most likely to become an annuity: 20% did.
Among plans of £100,000 to £249,999, 17% bought an annuity and 73% went into drawdown. Those are plans, not people: many retirees have several.
Before you buy
Step 1
Book a free Pension Wise appointment
Pension Wise is the government-backed guidance service. It is free if you are 50 or over with a pot-of-money (defined contribution) pension, and explains your options and how each is taxed.
Step 2
Get quotes from several insurers, with your health details
Answer the health and lifestyle questions honestly - they can only raise your income. Compare the same type of annuity from each insurer.
Step 3
Decide how much to turn into an annuity
An annuity cannot normally be undone once any cooling-off period ends. Covering essential bills with the State Pension and an annuity, and keeping the rest invested, gives you security without giving up all flexibility. The drawdown calculator shows how long the invested part would last.
Frequently asked questions
How much annuity will £100,000 buy?
At 65, the best rate on 8 October 2026 paid £8,172 a year (£681 a month) for life, fixed, or £5,564 a year rising with inflation. It was £7,476 fixed at 60 and £8,907 at 70. Rates change weekly, so get a live quote.
What pension will £100,000 buy at 60?
£7,476 a year fixed for life, or £4,884 a year rising with inflation, at the best rates on 8 October 2026. That is £623 or £407 a month before tax.
What pension will £100,000 buy at 55?
£7,078 a year fixed for life at the best rate on 8 October 2026, or £4,451 rising with inflation. Buying younger means a lower income because it has to last longer. From 6 April 2028 most people cannot take a pension until 57.
Is an annuity better than drawdown?
At today's rates an inflation-linked annuity at 65 pays £464 a month for life from £100,000 before tax, against about £370 a month from drawdown to 95 on our Balanced assumptions. Drawdown keeps flexibility and can leave money to your family; the annuity removes investment risk and the risk of outliving your money. Many people use both.
How long does it take for an annuity to pay back?
A fixed annuity bought at 65 for £100,000 pays £8,172 a year, so in cash terms, before tax, it pays back the full pot in about 12 years, at around 77. After that, you have had back more than you paid in. A guarantee period, or value protection (which pays your family a lump sum if you die before the annuity has paid out what it cost), can protect against dying early.
Is annuity income taxable?
Yes, as income, through your tax code. You can usually take 25% of your pension tax free before buying an annuity, but the income itself is taxed. With a full State Pension, a fixed annuity of £8,172 a year costs about £1,630 a year in tax.
Should I take my 25% tax-free cash before buying an annuity?
You can, but it reduces your income: taking £25,000 tax free leaves £75,000, which at 65 buys about £6,129 a year fixed instead of £8,172. It makes sense if you have a use for the lump sum, such as clearing a mortgage.
Can I get a higher annuity rate if I have health problems?
Yes. An enhanced annuity pays more if you have conditions such as high blood pressure or diabetes, smoke, or are overweight. On 8 October 2026 a 65-year-old smoker was offered £8,715 a year against £8,172 for a non-smoker.
Sources
- Best annuity rates · Hargreaves Lansdown
- Take your pension as a guaranteed income: annuities explained · MoneyHelper
- Pension Wise: learn how you can take your pension · MoneyHelper
- Tax when you get a pension · GOV.UK
- Retirement income market data 2024/25 · Financial Conduct Authority
- National life tables - life expectancy in the UK: 2022 to 2024 · Office for National Statistics
Keep going
This article is guidance, not financial advice. Annuity rates are quoted with their date and source and change every week. The drawdown comparison is produced by the same engine that powers our free calculators, in today's money on the assumptions named above, at 2026/27 rates. Your own position will differ - if a decision this size is close, speak to a regulated financial adviser.