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Annuity Calculator UK

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What is an Annuity?

An annuity is a type of regular pension income that will pay out for the rest of your life after you retire.

To buy an annuity you usually swap your defined contribution pension — an arrangement where you’ve been saving money into a specific pension pot or pots throughout your working life —for an annuity.

You can also buy an annuity from non-pension sources, such as bank savings, if so desired.

An annuity will provide a regular, steady income throughout retirement, meaning you don’t have to worry about your pension running out because you live longer than expected, for instance.

UK Annuity Rates Calculator

Annuity rates determine how much pension income you’ll receive in retirement based on the size of your current pension pot. If an annuities calculator offers you a yearly income of £5,000 from a £100,000 pension pot, this is an annuity rate of 5%.

Your annuity rate is calculated based on various different factors. These include the size of your current pension pot, your age, state of health and smoker status.

Unfortunately, rates are low in the current economic climate. That’s why it’s important to compare annuity rates from across the market using a tool such as our annuity rates calculator to make sure you find the best possible deal for your retirement.

Although the pension freedoms of 2015 mean that it’s no longer a requirement to buy an annuity if you don’t want to, it’s worth calculating your pension annuity anyway to see the retirement income your pension pot might buy you.

The calculator will give you a rough idea of how you could fare in retirement if you decide to go down this route.

What Do I Need to Use the Annuity Calculator?

Annuity rates are calculated based on a number of different factors, including:

  • Your age
    The older you are when you buy an annuity pension the better your annuity rate, as the company assumes they’ll be paying out an income for less time
  • Your health
    If you’re in poor health, consider an enhanced annuity for a better annuity rate
  • Your smoker status
    Smokers get better annuity rates because of their higher mortality risk, and may also quality for enhanced annuities
  • Whether you want a joint annuity
    This will provide a pension for a partner after you pass away
  • If you want to index-link your annuity
    An index-linked or escalating annuity pension receives a lower annuity rate initially to compensate for the fact that it will rise over time to maintain pace with inflation
  • Your postcode
    Different parts of the country have different life expectancy, so your annuity rate will be based on your home postcode.
Compare Top 10 Annuity Rates
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Compare Annuity Providers

It’s important you look across the market to find the best annuity for your needs. Many people simply choose the annuity offered to them by their pension provider, which may not offer the most favourable rate.

Below is a list of some of the UK’s top retirement annuity companies our calculator compares on your behalf.

aviva

Aviva

Known as Norwich Union until 2000, Aviva is one of the UK’s most-recognisable financial services brands. It’s also the UK’s biggest insurer. Aviva annuities are part of its wider pensions and wealth proposition.

Canada Life

Canada Life

Although headquartered in Toronto, Canada Life nonetheless has a strong UK presence, active here since 1903. Canada Life annuities include both lifetime and fixed-term options. In August 2017, Canada Life further strengthened its UK footprint when it agreed to purchase Retirement Advantage, another major UK provider.

Hodge Lifetime Annuities

Hodge Lifetime

Retirement income and lending specialist Hodge Lifetime was founded in 1965. In 2016, Hodge Lifetime’s annuities saw the company win the ‘Most Competitive Annuity Provider’ award at the Moneyfacts Investment Life & Pension Awards for the second year running.

Just Retirement annuity calculator

Just Retirement

JUST was born from a merger between Partnership Assurance and Just Retirement in 2017. Previously, JUST Annuities were sold under both the Just Retirement and Partnership brands.

legal & general

Legal & General

Founded in 1836 as a Life Insurance company for lawyers, Legal & General has since expanded into one of the country’s most-recognisable financial services brands. L&G is currently one of the UK’s top annuity providers.

liverpool victoria

Liverpool Victoria

LV was founded in 1843 and is one of the UK’s biggest general insurers. It also has a sizeable life and pensions division offering Liverpool Victoria annuities and other pension solutions.

Old Mutual

Old Mutual

London-based Old Mutual was founded in South Africa in 1845. Today it’s a global investment, savings and bancassurance provider. As well as offering its UK customers financial services, including annuities, Old Mutual also owns and operates the Intrinsic financial adviser network.

scottish widows

Scottish Widows

Scottish Widows became part of Lloyds Banking Group – which has been trading since 1765 – in 2009. Providing insurance in the UK since 1815, Scottish Widows itself is an old, well-established brand and offers pensions and annuities to UK customers from its Edinburgh headquarters.

Calculating How Much Annuity Your Pension Will Buy

Your annuity factor may be expressed as a percentage – e.g. if you get a £5,000 pension income from a £100,000 pension pot, it’s a rate of 5%.

Alternatively, you may see your annuity rate expressed in terms of income, so a rate of 3% means you’d get £300 for every £10,000 invested.

How much annuity your pension will buy depends entirely on your circumstances. When calculating your rate, the annuity formula is incredibly personalised to your needs. It will take into account a variety of lifestyle factors and the size of your pension pot to work out how much your retirement income will be worth.

Annuity Rate Table 2019

Total Pension Pot

60 Years Old

70 Years Old

£250,000

Aviva£11,213.16 p.a.

Aviva£15,240.96 p.a.

Annuity rates represent the top quotes and are accurate as of July 23, 2019

As pension annuity rates are entirely tailored to you and your circumstances, to provide these sample rates we’ve had to make a number of assumptions about the individual buying them.

To come to the above quotes, the assumptions we’ve made include:

  • They’ve bought a single annuity
  • They’re in good health with no pre-existing conditions
  • They don’t smoke
  • They don’t want a guarantee period so payments will continue after their death
  • They live in East Sussex, in the same postcode as our Brighton-based financial advisers.

Is Buying an Annuity Right for Me?

Without looking into your circumstances and offering regulated retirement advice, it’s hard to know whether or not you should buy a pension annuity.  This is because how much pension you’ll get is dependent on a variety of factors that are very much personal to you.

However, what is true is that annuity rates have fallen in recent years. Low interest rates and low yields on UK government bonds have hit providers hard. That means the annuity formula used today to calculate rates is poor, perhaps more so than it’s ever been.

Despite this, buying an annuity might still be right for you if:

  • You want a lifelong, guaranteed and inflation-proof retirement income
  • You don’t want to take on investment risk, even if it means higher returns
  • Your pension pot is small and might run out too fast with income drawdown
  • You’re ill or you smoke – here an enhanced annuity is often possible to get a better annuity rate
  • After your death, you want to provide a pension income for a spouse or partner who has little or nothing in the way of their own retirement savings
  • Your pension provider offers a guaranteed annuity rate – sometimes old defined contribution pensions offer an annuity rate far better than you’d get currently on the open market.

Fortunately, if today’s low annuity rates have put you off buying one a lifetime annuity is not your only option. It’s true that annuities offer the most security, with a guaranteed retirement income for life.

However, the low rate environment and the 2015 pension freedoms have seen more people consider an alternative to annuities: pension income drawdown.

The main point to remember about buying a pension annuity is that, once you do, you can’t go back and change your mind. Lifetime annuities are permanent investments.

You have more flexibility with pension drawdown. You can even opt to take flexible lump sums and income payments in the early years of retirement and then switch to a retirement annuity later if you wish.

Flexi-access drawdown and annuities are two very different retirement options and it’s important you truly understand the pros and cons of both before proceeding with either.

Expert Advice: Getting the Best Annuity

It’s worth getting advice when looking for the best pension for you. While an annuity might be right for some people, for others – such as those who want an easy way to pass down their pension or are keen for investment growth in retirement – it may not be the best option.

Tom Conner Director at Drewberry

If you are getting a little confused and would like some guidance we have a team of experts on hand to help you make the right decision.

Please don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry

I had the pleasure of dealing with Jake Mills in organising my insurance. Jake was fantastic to deal with — his patience and understanding really helped.

Brendan Kelly
26/09/2019
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