Annuities Are Back on the Table for Retirement Planning

Last week I read about a man who started working on the tills at Waitrose at 80 — and is still happily serving customers at 94. The article argued that working longer helps you live longer. It made me smile, but it also made me think: not all of us want to be working into our nineties. If you’d rather step away earlier, the real question is how you’ll fund those extra years of retirement. That’s why annuities — products that give you a guaranteed income for life — are back on the table.

Why are annuity rates so much better now?

Annuities are linked to bond yields. For much of the last decade, interest rates were at historic lows, which kept those yields — and annuity payouts — low. Now that rates have risen, yields have followed, and providers can promise higher levels of guaranteed income.

Just two or three years ago, a healthy 65-year-old could expect around 6–7% from a standard annuity. Today, it’s closer to 7.5% — a level not seen for years (Standard Life Annuity Rate Tracker). That means thousands of pounds more guaranteed income over the course of retirement.

How does this compare with drawdown?

For years, the trade-off was clear: drawdown offered flexibility and the potential for growth, while annuities meant certainty but lower income. Today, that gap has narrowed.

The Office for National Statistics (ONS) shows a 65-year-old man can expect to live to 83.5, and a woman of the same age to 86.5 — roughly 18–21 years of retirement income to plan for. At current levels, annuities can now produce an income broadly in line with what you might target in drawdown over that same period. The difference is that with an annuity, the income is guaranteed, however long you live.

What about leaving money to family?

This is where recent tax changes matter. Until very recently, the pension legislation changes from 2027 risked taxing pensions twice if left on death beyond age 75. That “double taxation” has been removed. Meaning, pensions may once again be among the most efficient assets to pass on.

Annuities don’t work in the same way. Once you’ve swapped your capital for income, it usually dies with you (unless you’ve added guarantees or spouse’s benefits). That can reduce your ability to leave wealth behind, so there’s a balance to strike.

Why this matters in London

I suspect not many of my clients want to be stacking shelves in M&S Blackheath Standard at 94. I meet plenty of people who love their work but also want the choice to step back — to enjoy walks through Greenwich Park, time with grandchildren, or travel. The challenge is that London life isn’t cheap. Council Tax, service charges and travel costs don’t disappear when markets wobble. Having a guaranteed income to cover those essentials can provide peace of mind. For many people we meet, the right answer isn’t all-or-nothing. It’s about blending annuity income with flexible drawdown — securing enough to keep the lights on, while leaving room for choice and legacy.

Final thought

Retirement planning is always about balance. The return of competitive annuity rates changes that balance. Suddenly, it’s not a straight trade-off between certainty and flexibility. Annuities now stand shoulder-to-shoulder with drawdown as a credible option.

For some, that means locking in peace of mind. For others, it means using a mix of both. Either way, it’s worth a fresh conversation.

By Daren Wallbank - Chartered Financial Planner & Co-Owner, Ginkgo Financial

Important Information

The value of investments can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results. Pensions and retirement income options are complex; this article is for information only and should not be taken as advice.

Approver Quilter Financial Services Limited Ltd 19/09/2025