It’s been another big year for the annuity market with FCA data showing sales growing by 13.2% in 2025-26. Income drawdown and taking pensions as cash remain the most popular ways of accessing a pension but these figures show annuities continue to play an important role in the retirement income market.
This article isn’t personal advice. Remember, you can usually access money in a pension from age 55 (rising to 57 in 2028). If you’re not sure an action is right for you, ask for advice.
Why annuities are making a comeback
It’s a remarkable turnaround for a market that looked to have run its course in the aftermath of Freedom and Choice reforms which increased flexibility in how to take a retirement income.
These flexibilities were embraced warmly by retirees who were hesitant to be locked into an annuity, especially when a prolonged period of low interest rates had pushed down incomes. Annuities went from being the default retirement income choice to being shoved to the sidelines.
Soaring incomes have been key to the market’s success with gilt yields helping to push annuity rates skyward over the past few years. The latest data from HL’s annuity search portal shows a 65-year-old from an average postcode with a £100,000 pension can get up to £8,138 per year from a single life annuity with a five-year guarantee (correct as at 8th October 2026).
This is more than 60% up on the £4,940 available five years ago and has been tempting people in search of a level of guaranteed income back to the market.
Single life vs joint life annuities
It’s vital to do your research before you purchase an annuity though.
For instance, if you’re married you may want to consider a joint life annuity that continues to pay an income to your spouse after you die. Opting just for the higher income offered by a single life annuity could see them left with nothing.
And looking at the FCA’s data there’s signs that this may be happening.
Between April 2025-March 2026 67% of annuities were sold on a single life basis. This could be for a variety of reasons other than the annuitant just being single. For instance, the partner may already have sufficient pensions themselves and not need the money.
However, there’s also a chance that the single life option has been chosen because that’s the highest income offered and there could be a nasty shock in store for an unwitting spouse.
Should you consider an inflation-linked annuity?
Similarly, the issue of inflation must also be considered.
You could be retired for a very long time and during that period inflation will nibble away at your purchasing power. Level annuities offer a much higher income than the starting income from an inflation linked product.
As an example, the latest HL annuity rates show an annuity that increases by 3% per year can deliver a starting income of up to £6,094 per year for a 65-year-old with £100,000. This compares to the £8,138 on offer from the level product.
There’s a big difference between the two incomes and there’s lots to consider. If you live a long time, then you may be very grateful to have an income that increases every year. However, this also needs to be balanced against the time it would take for the income from an inflation linked product to catch up with what you would have had from a level one.
It’s important to say that you don’t have to put all your eggs in one basket and annuitise your entire pension at once.
You may choose to remain in income drawdown in the early part of your retirement and then annuitise later. Alternatively, you may annuitise in stages throughout retirement securing income as your needs evolve while keeping a level of flexibility by keeping a portion in income drawdown.
Once bought, an annuity cannot be unwound so it’s vital you consider what type of annuity best meets your circumstances.
Taking guidance or advice can help you find the right solution for your needs. The government’s free Pension Wise service can help if you’re over 50 and need guidance about your retirement options. You should also get personalised financial advice