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Worries over the looming inheritance tax raid on pension pots combined with better returns have seen interest in annuities surge.
Pension and retirement specialist Standard Life says the proportion of people aged over 75 getting an annuity quote has quadrupled in the last two years.
It added that the number of quotes for annuities worth at least £1million more than doubled between 2024 to 2026.
When it comes to the level of annuity that Standard Life has actually paid out, this is up 14 per cent from 2025 to 2026 – increasing from £91,000 to over £100,000.
Pete Cowell, head of annuities at Standard Life, said that the data reflects how retirement needs and planning behaviours are evolving.
'The forthcoming inclusion of pensions within inheritance tax is prompting many to revisit how they use their pension savings, and annuities are one of a number of options available,' he said.
An annuity lets you use your pension pot to buy a guaranteed income in retirement, which can be linked to inflation and involve an income for a loved one when you die.
Annuities fell out of favour after the financial crisis when rates crashed as the Bank of England cut the base rate to just 0.5 per cent.
A subsequent rule change stopped most retirees with defined contribution pension pots being forced to buy an annuity, leaving them able to fund retirement by staying invested instead.
But annuity rates have seen a resurgence in recent years as interest rates have gone back up and demand has begun to climb again.
Those considering an annuity should shop around for the best rates and consider which type is best for them. Single-life level lifetime annuities offer higher payments until you die but do not offer inflation protection or pay out any income to your spouse after your death.
Others have lower payments that will rise with inflation, while a joint lifetime annuity will pay an income to a beneficiary for the rest of their life.
A healthy 65-year-old can currently get a £7,936 annual income from a £100,000 pot on a single-life level annuity, according to Hargreaves Lansdown.
In contrast, the same individual would get a £5,328 income from a £100,000 pot on a joint-life annuity, which paid 50 per cent income to a beneficiary at death, with payments rising 3 per cent each year.
You may get a higher income if your health or lifestyle means that your life expectancy is shorter than average.
This is Money's partner Pense has a calculator to help you check the best annuity rates*.
What's driving renewed interest in annuities?
An annuity is a financial product that lets you cash in some – or all – of your pension pot in return for a guaranteed income in retirement.
This can last for your whole life or a set period. It's possible to add extra protections to an annuity, such as the ability to pass the income to a spouse on death.
They're getting more attention now because of rising annuity rates, which improve the income you can receive, and because pensions will be subject to inheritance tax from April 2027.
With inheritance tax kicking in when an estate is worth £325,000 for a single person, more people will be brought into the inheritance tax net.
But exchanging a pension pot for an annuity reduces the value of the estate. Inheritance tax rules are very complex, so it's worth speaking to a financial adviser to understand your options.
Many don't understand annuities
According to a report from the independent Second Pensions Commission, annuities are more popular among:
- older adults – e.g. those aged 65 to 74 accessing pensions
- people with larger pension pots
- people with higher income levels
- those who have taken financial advice
However, the same report says that annuities are still seen to offer poor value for money and are not flexible.
This is backed up by separate data conducted by Standard Life in 2025, which reveals that while there's a growing understanding of the options that annuities provide, the majority of over 50s are still uncertain about their flexibility.
Only 37 per cent of over-50s understand they don't need to use their full pension pot to buy an annuity – although this is up from 31 per cent in 2024.
What's more, just 38 per cent are aware that an annuity can give an income to a spouse over their lifetime, while only 35 per cent recognise that annuities can be used alongside drawdown.
Income drawdown refers to taking money directly from your pension pot when you reach retirement age.
> Read more: How to invest your pension with a self-invested personal pension
Comprehension plummets among those who aren't yet retired, according to data from the consumer champion magazine Which?.
Some 52 per cent of respondents said that they don't know what an annuity is, while just over a quarter confused annuities with equity release by saying they help you access the money tied up in your home.
Financial advice could lead to a better understanding of how annuities fit into an overall retirement plan.
We have a guide to annuities that explains more about them, from how they work to the options available.