Glossary · UK
What is Annuity?
An insurance product converting a pension pot into guaranteed income for life.
Full Definition
An annuity is a contract with an insurance company that converts your pension pot into a guaranteed income for life (or fixed term). At age 65 in March 2025, a healthy single male got ~5% level rate — £200k pot → £10k/year for life. Variations: joint-life (continues to spouse), guaranteed period (5/10 years paid even if you die), enhanced (higher rate for smokers/medical conditions), RPI-linked (rises with inflation but starts ~40% lower). Irreversible once bought. Best for those wanting security; weak for inheritance.
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Disclaimer: Definitions are for guidance only. For decisions about your tax, savings, property or pension situation, always consult a qualified professional or refer to gov.uk.