Answers · UK 2025/26
Should I choose drawdown or annuity for my UK pension?
Annuity = guaranteed income for life, no investment risk but no flexibility, dies with you (unless joint). Drawdown = keep invested, flexible withdrawals, inheritable, but you carry the investment + longevity risk. Many use both.
Full answer
UK pension access options at retirement. Annuity — exchange your pension pot for a guaranteed lifetime income from an insurer. Rates 2025: ~6-7% for healthy 65-year-old (single life), enhanced rates if you have health conditions. Pros: certainty, no investment management, can't outlive it. Cons: no inheritance (unless joint-life or guaranteed period), can't change terms, depends on rates at purchase, may not beat inflation if level. Drawdown (flexi-access) — keep pot invested, withdraw as needed. Pros: flexibility, inheritable (within new IHT rules from April 2027), continued growth potential, can buy annuity later. Cons: investment risk, longevity risk (running out), needs management. Mixing — common strategy: annuity covers essential living costs (replacing State Pension shortfall); drawdown for discretionary spending. Annuity rates are highest in your late 60s and improve with health declarations. Pension freedoms (2015) mean you can take any combination. Always consider regulated advice for pots over £100,000 — Pension Wise gives free 60-min guidance from age 50.
Try the calculator
More answers
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.