November 7, 2023

Back with a bang!

Are annuities back with a bang?

Annuities have had a tough decade or so with a number of different factors contributing to modest annuity rates including ultra low interest rates and longer life expectancy. When George Osbourne announced ‘pension freedoms’ in 2015 removing the requirement to purchase an annuity this seemed to be the final nail in the coffin. But are they back with a bang?

With rising interest rates over the last 12 months this has led to increases in annuity rates as you can see from the information below.

Age Income

60 £6,497

65 £7,206

70 £7,946

This is the gross annum income based on an annuity purchase amount of £100,000, on a single life basis, paid monthly in arrears, with no escalation and no guarantee period.

These figures are gross, and an individual would need to deduct their marginal rate of income tax. If we assumed the individual to be a basic rate taxpayer a 65 year would net £5,764.80 per annum. It would take just over 17 years for them to receive their money back. A 65-year-old male current life expectancy is 85 and a female is 87, meaning the numbers are starting to look a lot more attractive.

Whilst the financials are important it is also worth while considering the pros and cons, comparing an annuity purchase to that of the drawdown option.


The amount you get is guaranteed.

You pay your provider a fixed  amount to buy your annuity. They will then make guaranteed payments to you  for the rest of your life or an agreed period.

Once agreed, it can't be  changed.

Your pension annuity can’t be  cashed in or surrendered. You can’t make any changes once it’s up and  running.

Your health and lifestyle  matter.

If you’re not in good health,  or make certain lifestyle choices, providers may offer you a higher income.

Your loved ones might inherit some money.

You can have a joint life annuity meaning it will continue to pay out  in the event of death.


The amount you get is not guaranteed.

The value of your pension pot  can go down as well as up. That can affect the amount you can draw down from  it. But your payments aren’t fixed – you can choose how much income you want  to take, and when. But because it’s not guaranteed, you could run out of  money.

Once agreed, it can be  changed.

You can draw down as much money  as you want, stopping and starting whenever you want to. You can buy a  pension annuity at any future point.

Your health and lifestyle  don’t matter.

Your age and lifestyle make no difference to the amount you might get from drawdown.

Your loved ones might inherit some money.

You can name a loved one as a beneficiary, so they can inherit your pension fund after you die in fact the pension fund can be passed down through generations.

In summary the drawdown option is likely to provide an individual better flexibility most notably via the income payments and death benefits however the annuity is likely to provide better security of income. There is no right and wrong and it’s always down to an individual’s personal circumstances. I believe It’s important to receive the right advice as the devil is in the detail and an individual shouldn’t make a decision based solely on this article. I am here should you or anyone you know have any questions please do not hesitate to contact me.

Source: assure web and ONS.
 This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
A pension is a long-term investment, the value of your investment and the income from it may go down as well as up. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Past performance is not a reliable indicator of future performance.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

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