Annuity Rates: The Basics

Purchasing an annuity is one of the most significant financial decisions you will ever make – and once you’ve committed to it, you can’t change your mind or switch to a more favourable policy. That’s why getting the right information is absolutely vital when you start to think about your retirement.


If you have a personal pension plan, you will likely receive an annuity quote from your provider as you approach retirement. However, you are under no obligation to accept this quote or buy your annuity from the same company that handled your personal pension.

At Compare Annuity, our free service connects you with an independent financial advisor who can take you through your options and search the whole market for personally tailored annuity rate quotes from the UK’s leading providers – helping you to make a decision that represents the best value and maximises your retirement income.

The Open Market Option

Introduced in 1975 as part of the UK Finance Act, the Open Market Option is your legal right to compare the market for the best possible annuity quotes, rather than simply accepting the first offer you receive from your existing provider.

This flexibility is hugely important, as an estimated 80% of retirees could secure a significantly higher income by shopping around than they could by sticking with their existing provider. However, almost a third of customers (33%) fail to take advantage of this opportunity.

Exploring the entire retirement market for better rates can seem like an intimidating, time consuming task – especially if you don’t consider yourself particularly financially savvy. At Compare Annuity, our independent retirement specialists can do the hard work for you – delivering personally tailored annuity quotes from all of the UK’s leading providers, with no cost and no obligation to buy.

In light of the recent pension reforms announced in the 2014 budget, the UK government has advised that all retirees seek independent guidance before buying an annuity. Failing to explore your options properly could cost you thousands of pounds every year in lost income.

Annuity Tables

This annuity table provides a rough estimate of the level of income you might expect to receive from your pension provider if you buy an annuity. It is important to note that annuity rates change frequently and the rates displayed below are for illustrative purposes only. Factors that might affect annuity rates include your age, the state of the economy, your general health and where you live.

For a more accurate assessment of your potential annuity income, please complete our simple form to claim a free, no-obligation initial consultation from one of our independent retirement specialists.

Our carefully selected independent advisors will:

  • Review the whole of the market for the best quotes and products
  • Take into account all of your personal circumstances
  • Explain your options and suggest next steps

Choosing the right type of annuity

In addition to comparing the rates offered by different providers, it’s also important to consider the different types of annuity that are available to you – all with distinct benefits and drawbacks. The industry is currently in a state of transition due to ongoing pension reforms, and new products are entering the market all the time. This means it’s more important than ever to seek independent advice from a retirement expert.

Common annuity types include:

Level annuity – You will receive a fixed, regular income until you die, at which point payments are stopped even if you have received less than the value of your pension fund.

Guaranteed annuity – Receive an annuity for a fixed period, with payments passing to your nominated dependent if you die during the agreed period.

Joint-life annuity – Your annuity income will be passed on to your partner in the event of your death, and continue to pay out for the rest of their life.

Escalating annuity – Your annuity payments will increase over time – either by an agreed percentage every year, or to match inflation rates.

Investment linked annuity – Your annuity income is linked to the performance of one or more investment portfolios, potentially increasing but with the risk that your income may fall if the investment performs badly.

Impaired health annuity – Claim an increased annuity rate if you suffer or have suffered from poor health.

Long-term care annuity – Set up your annuity income to help cover the cost of long-term care if and when you require it.

When you speak to one of our advisors, you’ll have the opportunity to learn about the different annuity types in greater detail and find out which ones could be the right option for you. Remember, the final decision is yours and there’s no obligation to buy any product or follow the recommendations made by your advisor.

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Annuity Checklist

Follow these tips to get the most from your life annuity.

  • Choose the best option. Shop around for the best pension annuity rates using the open market
  • Get advice from an independent financial advisor who specialises in annuities before you make your decision.
  • Think about inflation. It might be low today, but that might not always be the case in the future. You can inflation-proof your annuity by having it increase in line with price rises, although you’ll start off with a lower income than if you’d chosen a level rate.

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