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What are the Best UK Annuity Rates 2019?

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Getting the best annuity rate requires researching the whole UK market. You’ll need to search the top annuity providers to get the right pension for your retirement as the income they provide can vary from one provider to the next.

Don’t just assume the offer from your pension provider will be the best annuity rate. It pays to compare annuities from the whole market to find the right pension for you.

Once you make the decision to buy an annuity you can’t change your mind, so you have to be sure you’re getting the best possible rate. If you’re opting for an annuity it’s important to do the necessary research to maximise your gauranteed income from your pension so you can enjoy the best retirement.

What is an Annuity?

An annuity is a regular income paid to you by a financial services company until you die. You buy this with all or part of your accumulated defined contribution pension fund and, in exchange, you receive a regular income for life.

Historically, pension rules required you to turn your pension fund into an annuity if your pension pot was below an arbitrary figure. Now, though, the 2015 pension freedoms mean that you can decide how and when you spend your pension money.

You could convert it all into an annuity. Or you could take part of your pension as an annuity and leave the remainder invested, taking income from it as you wish (known as pension drawdown).

The main advantage of an annuity is that your pension fund cannot run out. The annuity is guaranteed for the rest of your life and is 100% backed by the Financial Services Compensation Scheme.

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Is an Annuity Best for My Retirement?

Whether an annuity is best for your retirement depends entirely on your circumstances, but there are a number of benefits to having one. Firstly, the cash never runs out, so you won’t have to worry about exhausting your pension savings in your old age.

There’s also no investment risk – once you’ve handed over your pension pot your income is safe no matter how markets perform. What’s more, as people are living longer the chance for a lifelong income is looking more attractive.

Do I Have to Buy an Annuity?

No, it is not mandatory to buy an annuity when you reach retirement. As mentioned, the new pension freedoms mean that you are no longer required to buy an annuity. This used to be a requirement for those with smaller pension pots, and for everyone once they reached the age of 75.

What is Pension Drawdown? An Annuity Alternative…

One alternative option you have is drawing down your pension instead. Here you take all or some of your pension pot and invest it in a drawdown fund, withdrawing cash lump sums and / or income payments from it as you see fit.

The flexibility of this option is reflected in the name: flexi-access drawdown.

Some people may find there are advantages to choosing flexi-access drawdown compared to an annuity, such as:

  • Adaptable income
    With pension drawdown, you can dial your income up or down as your circumstances change, which can potentially allow you to avoid large tax bills or simply plan for a variety of financial events.
  • Drawdown pensions can be inherited
    Annuity income typically dies with you, unless you’ve opted for a joint life annuity or a guarantee period, which will come at the cost of a lower initial income. A drawdown pension pot can be inherited free from inheritance tax.
  • Low annuity rates
    Annuity rates are very low currently due to the wider economic environment, which means you may struggle to find the best pension deal.
  • Missing out on rate rises in the future
    If annuity rates rise in the future and you’ve locked in your annuity rate today, you could miss out on higher future rates.

While an annuity pension prevents your income from running out, with pension drawdown there’s a chance it might. The value of your pension could fall as well as rise with drawdown, meaning you could get back less than you invested.

Pension Drawdown Calculator

When will your income drawdown pension run out? Enter the anticipated size of your pension pot at retirement and follow these easy steps to calculate how long your pension will last.

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Annuity Rates Calculator 2019

Your annuity rate — which determines how much annuity you can buy with your pension — will depend on a number of factors.

Calculating the cost of an annuity requires taking into account a number of factors, including:

  • Your age
  • Your life expectancy
  • Your health/medical conditions
  • Your smoker status
  • The type of annuity you’re looking to buy.

Below is an annuity rates table indicating the annuity value an average, healthy male could expect to receive at age 60 and age 70 with three varying pension pots. However, it’s no substitute for getting your own annuity rate — for that use our annuity calculator.

Total Pension Pot

Age 60

Age 70

£100,000

£4,412.52

£6,157.89

£250,000

£11,111.88

£15,254.40

£500,000

£22,957.43

£30,067.57

Rates represent the top deal from our annuity quote engine and are accurate as of August 3, 2019

Assumptions we’ve made to calculate the rates in this annuity factor table include:

  • They’re male
  • It’s a single annuity
  • They’re in good health
  • They’ve got no pre-existing conditions
  • They’re a non-smoker
  • 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
  • They’ve not taken their 25% lump sum
  • The annuity is level, so it won’t increase over time to keep pace with inflation.

We’ve made a number of assumptions to calculate these annuity rates, which is why they can only be a rough approximation of how much annuity your pension will buy.

Compare Current Annuity Rates 2019

To get the best annuity rate, you need to research the entire market to look at what each provider will offer. You can do this yourself, carting around your details to the various different annuity companies to see what they’ll offer you or you can use our Annuity Rates Calculator will do all of the legwork for you by comparing the leading providers.

Which Annuities Have the Highest Interest Rates?

Enhanced annuities

The annuities with the highest interest rates tend to be for those who are ill and have a shortened life expectancy. Known as enhanced annuities, this assumes you’ll be drawing on your annuity income for less time and so pays a higher income. This could be because you have an illness or you’re a smoker.

Single or joint annuities?

Single annuities will pay a higher rate than a joint annuity. As joint annuities continue paying out to a partner after your death, the annuity company estimates that they’ll have to pay out for longer and so will likely offer a lower rate.

Annuities with guarantee period

An alternate way to secure an annuity that will continue paying out after your death is to buy an annuity with a guarantee period. This will continue to pay out for a set number of years after you pass away, providing you die between the start of the annuity payment and the end of your guarantee period. You choose the length of the guarantee period – the longer your guarantee period, the lower your annuity rate.

Escalating annuities

Escalating annuities rise each year in line with inflation. If you choose to index-link your annuity, you’ll likely receive a lower initial income in exchange for the fact that your pension income will rise each year.

However, index-linking an annuity is a powerful way to ensure that inflation doesn’t reduce the ‘real’ value of your pension over the long-term.

Short-term annuities

Short-term annuities last for a set period, say five or ten years, or until you die (whichever is first). This is compared to lifetime annuities, which last for the rest of your life. These tend to offer higher rates than lifetime annuities because they’re paid for less time, meaning you need to use less of your pension pot to buy one.

Capital protected annuities

A capital protected annuity – also known as a value protected annuity – protects a set proportion of your initial investment. This is then returned to your family after your death if you die before receiving in annuity income the equivalent sum you paid the annuity company. If you opt for a capital protected annuity, then your annuity rate will be lower. The larger the proportion of your initial annuity payment you’re looking to protect, the lower your annuity rate will be.

Deferred annuities

A deferred annuity is where you agree with your annuity company that you won’t begin receiving your annuity until a later date. This is opposed to straight away, as is typically the case with annuities. The longer your deferred period, the higher your annuity rate.

The Top UK Annuity Providers

aviva

Aviva

Formed from the merger of CGU PLC and Norwich Union in 2000, Aviva is today the largest insurer in the UK. As part of its financial services offering, Aviva annuities are sold through its life and protection division.

Canada Life

Canadian insurance company Canada Life has been operating in the UK since 1903 and, in August 2017, expanded further by purchasing another UK annuity provider, Retirement Advantage. Canada Life annuities include both fixed-term and lifetime options.

Hodge Lifetime Annuities

Hodge Lifetime

Founded in 1965, retirement income and lending specialist Hodge Lifetime offers a range of retirement solutions, including annuities and equity release. 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 in a row.

Just Retirement Annuity

Just Retirement

Rebranded as JUST in 2017 following a merger with Partnership Assurance, the company previously sold annuities under both the Just Retirement and Partnership brands.

Legal & General

Legal & General is one of the UK’s most-recognisable financial services brands and was founded in 1836. L&G’s annuities are therefore backed by one of the oldest providers in the country.

liverpool victoria

Liverpool Victoria

Founded in 1843, Liverpool Victoria is a friendly society and one of the UK’s largest insurers. As well as general insurance, LV is also one of the UK’s largest annuity providers.

scottish widows

Scottish Widows

Formed in 1815, Scottish Widows has been part of Lloyds Banking Group since 2009. The Edinburgh-headquartered financial services provider offers Life Insurance, investments and pensions, including annuities.

Annuities Advice

Choosing the right annuity for you is a big decision because, once you purchase one, there’s no going back. That’s why you need to be sure you’re getting the top annuity rate that’s possible on the market today.

Tom Conner Director at Drewberry

If it is all getting a bit confusing and you need some help please don’t hesitate to get in touch.

Pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry

Extremely satisfied with the help and advice from Drew, since the beginning him understood what I was looking for and have the patience to help me out with all my questions and doubts. Didn’t tried to be push or annoying calling me all the time like so many did before. At the end we find the perfect medical policy for me and my daughter that covers everything that we need. I more than recommend them and if in the future I need something else for sure I will contact them again. Giving only 5 stars because I can’t give 6!!!!

Natasha Caversan Mucci
07/06/2019
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