Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “The popularity of annuities continues to soar, with more and more people making use of them as part of their retirement planning. HL client data shows the average annuity purchase size has rocketed more than 160% in recent years – up from £62,301 in the first six months of 2021 up to £162,729 in the same period of 2025. This indicates that the values on offer are appealing to a greater range of people and flies in the face of the idea that people with bigger pension pots opt for income drawdown.
It's easy to see why this is happening when you look at the market over the last few years. Annuity rates have boomed off the back of soaring interest rates and high gilt yields. Even recent decisions from the Bank of England to cut interest rates haven’t really put a dent in the incomes on offer. The most recent data from HL’s annuity comparison service shows a 65-year-old with a £100,000 pension can get up to £7,793 per year with a single life level annuity with a five-year guarantee. This is close to all-time highs and a vast improvement on the £4,943 available in August 2021. People on the look out for an element of guaranteed income in their retirement planning are deciding now is the time to lock in.
However, it’s really important to do your research before buying an annuity. Once bought, an annuity cannot be unwound and consider what you need very carefully. If you are married or in a civil partnership you may decide to opt for a joint, rather than single life annuity so your partner is taken care of. You also need to factor in the impact of inflation over the long term into your plans. Starting incomes from inflation linked annuities tend to be much lower than level products but over time they might be the right choice. Alternatively, you may choose to annuitise in segments throughout retirement and keep a portion of your pension invested through income drawdown, where it has the potential to grow and keep up with inflation.
You also need to do your research on different providers. They will all offer different rates so if you opt for the first quote given you could potentially miss out on thousands of pounds over the course of your retirement. Using an annuity comparison service to look across the market will help you make the right choice for you.”
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