Is It a Good Time to Buy an Annuity in 2025?
By Clare Townhill • Updated 29 November 2025
Disclaimer: Prices and ratings correct at time of writing.
After years of record lows, annuity rates have surged to their highest level in more than 15 years — offering retirees the best guaranteed income returns since before the financial crisis. So, is now the time to lock in? Here's what's driving the change, who it suits, and how to make the most of the current market.
At a Glance: Annuity Rate Summary (2021-2025)
Chart: The benchmark annuity rates chart is £7,819 pa on 1 October 2025 - the highest annuity rate since October 2008
Customer Scenario: Average annual income for a 65-year-old with a £100,000 pension pot (single-life, level annuity):
| Year |
Average Annual Income (£) |
Change vs Previous Year |
Market Context |
| 2021 |
£4,650 |
— |
Record-low gilt yields; ultra-low interest rates |
| 2022 |
£5,200 |
+12% |
Start of rate rises; gilt yields recovering |
| 2023 |
£6,380 |
+23% |
Inflation peaks; base rate hits 5% |
| 2024 |
£7,350 |
+15% |
Yields steady; stronger competition among providers |
| 2025 |
£7,819 |
+6% |
Highest rates in 17 years; stable gilt environment |
Sources: SharingPensions (Oct 2025), MoneyWeek (Sept 2025), Age Partnership data.
What Is an Annuity?
An annuity is a financial product that turns your pension savings into a guaranteed income for life.
You pay a single lump sum (usually from your pension pot) to an insurer, and in return receive a regular, fixed income for a set period — often for the rest of your life.
There are two main types:
- Lifetime annuities, which pay an income until you die.
- Fixed-term annuities, which pay for a specific number of years.
You can tailor an annuity to your needs by choosing:
- Single or joint life, to continue payments to a partner after you die.
- Level or escalating, to protect against inflation.
- Guarantee periods or value protection, which can ensure some of your fund is returned if you die early.
The main appeal is certainty: whatever happens to markets, your income stays stable and secure.
Why Annuities Are Attractive in 2025
Annuity rates are closely linked to long-term gilt yields — the interest paid on government bonds. With the Bank of England base rate at 5.25% and gilt yields around 5.1%, providers can offer higher guaranteed incomes than we've seen in years.
For example, a 65-year-old with a £100,000 pension pot could now secure an annual income of £7,652, compared to £4,696 in 2016 — a rise of more than 60%.
After more than a decade of ultra-low interest rates, 2025 marks a real turning point for retirees seeking a secure income.
Latest Annuity Rates (October 2025)
| Age |
Single Life (£100k fund) |
Joint Life (£100k fund) |
| 55 |
£6,654 p.a. |
£6,281 p.a. |
| 60 |
£7,014 p.a. |
£6,666 p.a. |
| 65 |
£7,652 p.a. |
£7,219 p.a. |
| 70 |
£8,619 p.a. |
£7,918 p.a. |
Based on standard, level annuities with no guarantee period (SharingPensions, Oct 2025).
Please bear in mind that, like interest rates, annuity rates fluctuate over any given period of time. So when applying for an annuity, it's worth getting a new quote at the last minute to ensure you're getting the best rate possible.
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What Affects Annuity Rates?
Several factors determine how much income you'll get from your pension pot:
- 15-year gilt yields – the main driver of pricing.
- Bank of England base rate – influences yields and insurer returns.
- Provider competition and margins.
- Your age, health, and lifestyle – older age or certain health conditions can raise rates.
- Annuity type – joint life, escalating, or guarantee options lower initial income but add protection.
Will Annuity Rates Fall Soon?
Experts expect annuity rates to remain historically strong through 2025, though small month-to-month adjustments are likely as gilt yields fluctuate. If the Bank of England begins easing rates later in the year, annuity returns could soften slightly, making now a potentially favourable window for buyers.
Providers currently report only minor weekly shifts (around ±1%), suggesting that today's rates are stable but near their peak.
How to Get the Best Deal
Annuity rates can vary by 25% or more between providers, so comparing the market is crucial.
When comparing quotes, check:
- The financial strength of the insurer.
- Whether quotes include joint-life or guarantee options.
- Enhanced annuity eligibility for health or lifestyle factors.
- Customer reviews and service reputation — ideally 4.5★ or higher on Trustpilot.
Always check more than one provider or go to a broker like Age Partnership who can check multiple providers and provide an unbiased market overview of the best options for you.
Calculate How Much More You Could Get
Before committing, use the Age Partnership annuity calculator to see how much extra income you could secure by comparing the whole market. Major UK providers covered include Aviva, Legal & General, Canada Life, Just Group, and Scottish Widows.
👉 Use the Annuity Calculator
A few minutes of comparison between providers could add hundreds of pounds to your annual retirement income.
Conclusion
With annuity rates at their highest since 2008, 2025 presents one of the best opportunities in years for retirees seeking stable, lifelong income. Even if rates ease slightly later in the year, they're expected to stay well above pre-2022 levels.
If you value certainty and peace of mind, it's worth reviewing your options now — and comparing quotes before you buy could turn a good deal into a great one.