Annuity vs Drawdown UK: Which Is Right for You?
A 65-year-old can now buy a 6.5% income for life. After a decade of rotten annuity rates, the maths changed and almost no UK retiree noticed.
2026 annuity rates: £100k pot for a 65-year-old
| Type | Rate | Annual income | Notes |
|---|---|---|---|
| Level (single) | 6.5% | £6,500 | Fixed for life |
| Level (joint 50%) | 5.7% | £5,700 | Continues to spouse |
| Inflation-linked | 4.0% | £4,000 | Rises with RPI |
| Enhanced (health) | 7.5% | £7,500 | Smoker or condition |
Indicative quotes for a non-smoking 65-year-old in good health, 2026.
Key takeaways
An annuity converts pension money into a guaranteed income for life; drawdown keeps the pot invested and you withdraw flexibly
Annuity rates have improved sharply in recent years - a 65-year-old can now buy ~6.5% annual income for life from a level annuity
Drawdown offers flexibility and inheritance but exposes you to sequence-of-returns risk and longevity risk
A hybrid approach (annuity covers essentials, drawdown covers discretionary) often produces better outcomes than picking one