Annuity payback period drops to 13 years

18 November 2025

With annuity rates still much higher than a few years ago, people buying an annuity can expect a much earlier break-even return on their investment. 

The best annuity rate on 1 November 2025 was 7.7%, according to Retirement Line’s in-house system that gathers quotes in real time from the UK’s leading annuity providers. That means someone buying a lifetime annuity at that rate with £100,000 would receive an annual income of around £7,700.

That compares to much lower rates available just a few years ago. For example, Canada Life reported a typical rate of 4.5% in early 2022. As with the recent example above, that’s based on a 65-year-old buying a single-life lifetime annuity.

Annuity payback periods

An important outcome of higher annuity rates is that the ‘annuity payback period’ is much sooner. This is the time it takes to receive back in income the amount of money used to buy an annuity. It’s the point at which you ‘break even’. From then on, you will have received back more than your initial investment.

Based on the best rate for November of 7.7%, the annuity payback period with a £100,000 annuity is just under 13 years. That means a 65-year-old would start receiving more than their initial investment by age 78.

Standard Life, one of the UK’s biggest annuity providers, recently reported on the impact of higher annuity rates on the annuity payback period. They pointed out that the 13-years payback period represents an improvement of nearly ten years compared with when annuity rates were at their low point. 

Furthermore, Standard Life looked at what higher annuity rates mean in terms of the total income someone might receive. They used the example of a healthy 65-year-old with a £100,000 pension pot, based on its September average rate of 7.65%, receiving on average roughly £14,000 more for a man and £15,000 more for a woman (because women tend to live longer). 

“Valuable income certainty” from annuities

Pete Cowell, head of annuities at Standard Life, said: “Annuity rates remain strong and continue to offer valuable income certainty for retirees, following a slight dip since May. In addition, around half of customers could qualify for an enhanced annuity, unlocking even higher income and a shorter payback period.”

He also noted that flexibility remains a key feature of modern annuities: “It’s important to remember that annuities offer flexibility and can be tailored to suit different retirement needs. While some people might prefer the certainty of a lifetime annuity, others might choose to keep part of their savings in reserve.

“Meanwhile, for those who want to adjust their spending more regularly, a fixed-term annuity can provide a way to secure income over the short term, giving retirees the security of knowing their bills will be met while providing an element of flexibility.”

What would an annuity look like for you?

Are you looking into buying an annuity to secure guaranteed income from your pension pot? Use our free annuity calculator for an initial view of what your income could be, and talk to one of our Annuity Specialists for further information and quotes from the UK’s top annuity providers. Please call us on 0800 652 1316 or email us at info@retirementline.co.uk. 

Source:

Standard Life report: Annuity payback period drops to just 13 years, as rates rise nearly 10% since 2024. IFA Magazine. Accessed 13/11/2025.