Answers · UK 2025/26

How much annuity income would a £250,000 pension buy in the UK?

Around £17,500-£18,750 a year before tax at age 65 for a single, level lifetime annuity in 2026/27, based on typical rates of about 7%-7.5%. Taking the usual 25% tax-free cash first and annuitising the remaining £187,500 gives roughly £13,500 a year instead.

Last updated: 10 July 2026Last reviewed: 10 July 2026How we verify

Full answer

Annuity income depends on your age, health, the options you choose and prevailing rates, so treat any figure as an estimate. For 2026/27, a healthy 65-year-old buying a single-life, level (non-increasing) lifetime annuity with £250,000 might get roughly £17,500-£18,750 a year before tax, equal to an annuity rate near 7%-7.5%. Worked example: you have a £250,000 pension pot. You first take 25% (£62,500) as tax-free cash, leaving £187,500 to annuitise. At a 7.2% rate that buys about £13,500 a year for life, taxed as income. If you instead annuitise the full £250,000 you might get about £18,000 a year, but you give up the tax-free cash entirely. Choosing RPI-linked increases or a 50% spouse's pension typically lowers the starting income by 30%-40%, so the same pot might start at only £8,500-£9,500 after tax-free cash is taken. Combined with the full new State Pension of around £12,548 a year, a £13,500 annuity would take total income to around £26,048, with a meaningful portion taxed at the 20% basic rate once the Personal Allowance is used up. At this pot size, some retirees choose a partial annuity purchase, annuitising only part of the pot for guaranteed income and keeping the rest in drawdown for flexibility. Enhanced annuities pay more for smokers or qualifying medical conditions. Use the pension calculator to compare drawdown against annuity outcomes.