The UK’s Best Pension Annuity Rates in 2025

If you’re approaching retirement and looking for a way to turn your pension savings into a steady, guaranteed income, an annuity could be worth considering. With rising interest rates and improved gilt yields, annuity rates in 2025 are some of the best we’ve seen in years.

In this guide, we’ll explore the UK’s best pension annuity rates in 2025, explain what affects your income, and help you decide whether an annuity suits your personal circumstances.

What Is a Pension Annuity?

A pension annuity is a product that converts your pension fund into a series of regular income payments. It offers guaranteed income — typically for life — regardless of how long you live or how the annuity market or stock market performs.

Common annuity types include:

• Single life annuity – Pays an income for your lifetime only.
• Joint life annuity – Continues to pay a portion to your partner if you die first.
• Enhanced annuity – Offers higher income for people with health conditions or lifestyle factors.
• Fixed term annuity – Pays income for a set period, then gives you a lump sum or other options.
• Level annuity – Pays the same amount each year, with no increases.

Choosing the right annuity depends on your goals, individual circumstances, and whether you prioritise income today or long-term protection.

How Are Annuity Rates Calculated?

Annuity rates are influenced by a mix of personal and market factors:

• Age and life expectancy – The older you are, or the lower your expected lifespan, the higher the income.
• Health and lifestyle details – Poor health or certain conditions can boost enhanced annuity rates.
• Type of annuity – A joint life annuity usually pays less than a single life annuity but offers longer-term protection.
• Market forces – Rising interest rates, gilt yields, and the performance of government bonds all directly affect offers from annuity providers.

In 2025, annuity rates are calculated using updated life expectancy models and current financial conditions — meaning some retirees are securing a noticeably higher income than in recent years.

How Much Income Could You Get?

Let’s say you’re a healthy 65-year-old with a £100,000 pension pot.

• A standard pension annuity on a single life, level basis might offer £6,200 to £6,700 per year.
• A joint life annuity with 50% survivor benefit might pay £5,500 to £6,100 annually.
• If you qualify for an enhanced annuity, your income could rise to £6,800 to £7,500 per year.
• An inflation-linked annuity would start lower — typically around £4,500 to £5,000 — but increase each year.

Your final quote will vary based on your personal circumstances, options selected, and which annuity provider you choose.

Written Comparison of Annuity Types

• A single life annuity provides higher income upfront but doesn’t continue after you pass away.
• A joint life annuity offers long-term security for couples, but the initial income is lower.
• A level annuity locks in a consistent payment, but won’t keep up with inflation.
• An enhanced annuity can provide a huge difference in income if you meet health or lifestyle criteria.
• A fixed term annuity offers flexibility and may suit those not ready to lock into a lifetime product.

Your choice will influence both your total lifetime income and how well your income keeps pace with your needs.

Mini Case Studies: Realistic Scenarios

Case Study 1 – Jane, 65, in good health
Jane has a £100,000 pot. She chooses a single life annuity, level income, no extras. She secures £6,500 per year, paid monthly.

Case Study 2 – Ian and Carol, both 67
Ian wants to support Carol after his death. They select a joint life annuity with a 50% survivor benefit. Their income is £5,900 per year, guaranteed for life.

Case Study 3 – Peter, 70, with diabetes and high blood pressure
Peter qualifies for an enhanced annuity and receives £7,400 per year from his £100,000 pot — over £1,000 more income than a standard rate.

Who Offers the Best Annuity Rates in 2025?

Several providers stand out in 2025 for competitive and flexible offers:

• Legal & General
• Aviva
• Canada Life
• Just
• Scottish Widows

These are among the UK’s leading annuity providers, known for offering personalised annuity quotes based on your full health profile and retirement goals.

If you have a defined benefit (final salary) pension and want to compare its value against an annuity, Pension Potential offers a free estimate. It can help you weigh up whether an annuity or transfer provides the better long-term outcome.

Can You Still Take a Tax-Free Lump Sum?

Yes. Most people take up to 25% of their pension pot as a tax-free lump sum before purchasing an annuity. The remaining funds are then used to generate annuity income. This option is still available in April 2025 and often used to clear debts, cover home improvements, or set aside emergency funds.

Myth-Busting: Common Misconceptions

“Annuity rates are poor.”
Not in 2025. Thanks to rising annuity rates and interest rates, many retirees are seeing the best offers in over a decade.

“You can’t take a lump sum and buy an annuity.”
You can — the tax-free lump sum comes first, then the remaining pot funds your annuity.

“Enhanced annuities are only for serious illnesses.”
Incorrect. Even conditions like high cholesterol or smoking history can qualify you for enhanced annuity rates.

“A joint life annuity isn’t worth it.”
If you want to protect your partner’s income, it often is — and in 2025, joint life annuity rates are more competitive than in the past.

Common Mistakes to Avoid

1. Not comparing providers – Don’t default to your existing pension provider.
2. Skipping enhanced annuity checks – Disclose all health and lifestyle details.
3. Ignoring inflation – A level annuity may fall short over time.
4. Rushing the process – Take advice from retirement specialists or financial advisers.
5. Choosing based on headline rate only – Consider death benefits, spouse protection, and flexibility.

Final Thoughts

If you’re considering an annuity, 2025 is a strong year to explore your options. With rising annuity rates, more competitive offerings from UK’s leading annuity providers, and a growing market for enhanced annuities, now is the time to ask, “How much income could I get from my pension?”

Take the time to gather annuity quotes, disclose your full circumstances, and think carefully about the trade-offs between flexibility, security, and total lifetime income. A well-chosen annuity can provide long-term peace of mind and reliable, guaranteed income that you can’t outlive.