Money Week explain the appeal of annuities

06 March 2026

Financial journalist David Prosser has outlined why he thinks annuity sales are ‘surging’.

Following recent news that 2025 was a record-breaking year for annuities, David’s article in Money Week dives into some of the reasons behind the attractiveness of annuities.

The Association of British Insurers says that we put £7.4 billion of our pension savings into annuities last year. That was 4% more than in 2024, and there was a particular increase in savers with larger pension pots choosing annuities.

An annuity is a way to turn money from your defined contribution pension savings into guaranteed regular income, either for life or a fixed term. It’s an alternative to income drawdown, where your pension pot is invested and you can take either a regular income or make ad hoc withdrawals.

David lists three reasons why he thinks pension savers are putting more money into annuities now than at any time over the last decade or so.

1. “Annuity rates have become much more generous over the past few years”

Annuity rates (and therefore income from annuities) have risen significantly in recent years, mostly as they are closely linked to interest rates and gilt yields. Both of these are much higher than they were a few years ago. 

In his article, David gives the example of a £100,000 pension pot buying a healthy 65-year-old annual income of £7,700 for life, compared to just £4,900 five years ago.

Annuity rates fluctuate as gilt yields and other market forces shift every day. On 1 March, Retirement Line’s annuity tracker showed a top rate of £7,584, just below the figure David quoted. In any case, everyone’s annuity rate will be shaped to their own circumstances, which is why getting annuity quotes across leading providers is so important.

2. “Annuities provide certainty and security”

David is referring here to the difference between an annuity and drawdown. Although your money has the potential to grow while it’s invested, that isn’t guaranteed. Either you or a financial adviser needs to keep an eye on your fund and investment performance.

David writes: “The increased uncertainty of the economic and political environment is even more unsettling if you’re managing a pension fund later in life.

“With drawdown plans, you’re constantly trying to work out how much income you can withdraw while being confident your money will last for as long as it needs to. Since you don’t know how long you’ll live or what returns your pension fund will achieve, that’s a difficult task. And in volatile times, it feels even more daunting.”

See our guide to annuities vs drawdown for more information on the pros and cons of each option.

3. “The changing rules on inheritance tax’

David writes: “Right now, pension assets bequeathed to your heirs don’t usually count towards the value of your estate for inheritance tax (IHT) purposes. But from April 2027, that will no longer be the case.

“As a result, your generous bequest of pension assets could actually mean you’re leaving your heirs with an IHT headache. In which case, an annuity, where you’re not passing on unused cash, may be a better option for all concerned.”

The situation with regards to annuities and IHT is not finalised yet. Our latest update was in September: Government publishes more details of reforms of inheritance tax on pensions

Tips for making the right choice on annuities

David Prosser also refers to a couple of extra points worth considering if you are interested in an annuity. He mentions the fact that there has been innovation from providers, with new types of annuities now available to provide more choice and flexibility.

Also, he reminds readers of the ‘golden rule’ with annuity purchases: “Never simply buy the annuity on offer from the pension provider where your savings are invested. Rates vary enormously from one provider to another – and, increasingly, so does the design of the product.”

Finally, he points out that people in “less good health” may qualify for higher rates from some providers with an enhanced annuity: “That could simply mean you’re a little overweight or have smoked in recent years, or even that you work [or worked] in a profession considered riskier.”

How to find your best available annuity rate

If you are considering an annuity for retirement income, 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.