Answers · UK 2025/26

How much annuity income would a £500,000 pension buy in the UK?

Around £35,000-£37,500 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 £375,000 gives roughly £27,000 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 £500,000 might get roughly £35,000-£37,500 a year before tax, equal to an annuity rate near 7%-7.5%. Worked example: you have a £500,000 pension pot. Tax-free cash is capped at the £268,275 Lump Sum Allowance regardless of pot size for most savers, so you cannot simply take 25% of £500,000 (£125,000) if that figure would exceed your available lump sum allowance -- most people with a £500,000 pot can still take the full 25% (£125,000), leaving £375,000 to annuitise. At a 7.2% rate that buys about £27,000 a year for life, taxed as income. If you instead annuitise the full £500,000 you might get about £36,000 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%. Combined with the full new State Pension of around £12,548 a year, a £27,000 annuity would take total income to around £39,548, likely including some income taxed at 40% higher rate depending on other sources. At this pot size, many retirees split the pot between a modest guaranteed annuity to cover essential costs and flexible drawdown for the rest. Use the pension calculator to compare drawdown against annuity outcomes.