2025 a record-breaking year for annuities

19 February 2026

The level of pension savings used to buy annuities in 2025 was the highest since 2014. Data from the Association of British Insurers (ABI) shows that UK pension savers put £7.4 billion into annuities last year, a 4% increase on 2024.

The fact that this was the most since 2014 is significant. That was the year in which the ‘pension freedoms’ created more choice for turning pension savings into income, rather than restricting most savers to buying an annuity.

In addition to the 4% year-on-year growth in total pension savings used to buy annuities, a second important figure has been announced. Last year saw a trend toward larger pension pots being used to buy annuities:

• Sales of annuities over £250,000 rose by 31%.

• Sales of annuities over £500,000 rose by 54%. 

• The average annuity value rose to £84,000, which was a 7% annual increase. 

The ABI data also reports that in 2025, the number of people aged 70-plus buying annuities with some or all of their pension savings rose by 8%. 

Escalating annuities show robust growth

Perhaps unsurprisingly after a period of high inflation, escalating annuities saw particular growth. These are annuities where payments increase each year, by a set amount or linked to changes in the inflation rate.

The number of escalating annuities taken out in 2025 increased to just over 18,000. This is up 10% from 2024 and the highest level since 2013. 

Rob Yuille, Head of Long-Term Savings at the ABI, says: “A striking feature of this year’s data is the increase in the size of pots being annuitised, paired with people choosing to secure a regular income at older ages.

“With pensions coming in scope of inheritance tax from April 2027, choosing an annuity means a guaranteed income for life, with the option of providing for loved ones without worrying about potentially penal tax impacts.”  

Strong annuity rates fuel demand

As we reported last month, UK annuity rates are holding at near-record levels, which is likely one of the factors fuelling decisions to use pension savings to buy an annuity. Higher rates mean more guaranteed income, either for life or a fixed term.

If you are considering an annuity, our friendly specialists are here to help. They will explain your options and explore how much guaranteed income you could achieve from your pension fund, based on the very latest rates.

You can speak to our team today by calling freephone 0800 652 1316 or request a call back. Alternatively, use our free online tools for an instant estimate of how much annuity income you might expect to achieve.