At what age is it best — to buy an annuity?

How rates improve with age

An annuity rate is driven by two factors: the buyer's age (which determines expected payout duration) and prevailing gilt yields (which determine the return the insurer earns on the capital).

At 60, a level single-life annuity currently pays around 7.1% of the pot per year. At 65, roughly 7.9%. At 70, about 8.7%. At 75, close to 9.9%. These figures are drawn from Hargreaves Lansdown's published best-buy table (14 May 2026) and move with gilt yields, but the age gradient is consistent: older buyers get more per pound because the insurer expects to pay for fewer years.

The improvement is not linear. The rate accelerates at older ages because mortality risk increases exponentially. The jump from 70 to 75 is proportionally larger than from 60 to 65.

This creates an apparent incentive to wait. But the incentive is smaller than it first appears — and, on the rate alone, usually not the real reason to delay.

The cost of waiting (opportunity cost)

Delaying an annuity purchase means the pot stays invested — which has both upside and downside. The pot may grow, producing a larger fund to annuitise later at a better rate. Or it may fall, producing a smaller fund that partially or wholly offsets the improved rate.

There is also a simpler opportunity cost: the years of guaranteed income you forgo while waiting. And at current rates, the age-related rate improvement over a five-year wait is modest. A £100,000 pot buys roughly £7,900 a year at 65 and roughly £8,700 at 70 — an uplift of only about 9%, or £800 a year. Against that, waiting from 65 to 70 forgoes around £39,500 of income you could have drawn in the meantime. On the rate improvement alone, it would take decades of the slightly higher income to make up that ground — so waiting purely to secure a better annuity rate rarely pays off on its own.

That is why the genuine reasons to delay are usually not the age gradient at all. They are whether the pot might grow while it stays invested, and whether your health might change (see below) — not the few extra percent the rate ticks up each year. This comparison also simplifies one thing: in practice, someone delaying an annuity would normally be drawing income from the pot in the meantime rather than taking nothing, which turns the question into one of annuity versus drawdown timing rather than a simple wait.

The annuity calculator can help model the income from different purchase ages on the same pot.

Health as the wildcard

Health disrupts the age calculation in two ways.

First, declining health may qualify for an enhanced annuity. If a condition develops at 68 that would not have been present at 62, waiting inadvertently produces a better rate — not because of age alone, but because the enhancement adds 10–40% on top of the age-related improvement. This is not something that can be planned for, but it is worth knowing: health status at the time of purchase matters as much as age.

Second, someone with a shortened life expectancy faces a different calculus entirely. The case for an annuity — a product that pays off over a long life — weakens if the expected payout period is short. In those circumstances, drawdown or a lump sum may deliver more total value. Conversely, someone in excellent health at 70 with a family history of longevity has the strongest possible case for an annuity: the insurer is likely underpricing their actual lifespan.

Phasing: buying in tranches

The single hardest problem with annuity timing is that rates change. Gilt yields move daily. An annuity purchased in early 2022 would have paid roughly a third to a half less than the same annuity in 2024, purely because of interest rate movements — a healthy 65-year-old's income on a £100,000 pot rose from around £4,500 a year to over £7,000 across that period. Nobody can reliably predict where gilt yields will be in three or five years.

Phased annuity purchase — buying an annuity with a portion of the pot every few years rather than all at once — is the standard hedge against this timing risk. It works on the same principle as pound-cost averaging in investments: by spreading purchases over time, you avoid the risk of buying everything at the worst possible moment.

Advisers often describe a phased approach along these lines: keep the pot in drawdown from the initial access age, then annuitise a portion of the remaining pot every few years. Each tranche is bought at a higher age (better rate) and at whatever gilt yield prevails at that time. By the mid-70s, most or all of the pot has been converted to guaranteed income — at a blended rate that smooths out the peaks and troughs of any single purchase date.

This phased approach also interacts well with the hybrid strategy: the drawdown portion shrinks naturally over time as tranches are annuitised, reducing investment risk precisely when the retiree is oldest and least able to recover from a market downturn.

The trade-off is complexity and ongoing decision-making. Each tranche requires a new annuity purchase, a new round of comparison shopping, and a judgment about how much to convert. For those who want simplicity, a single purchase at a chosen age is cleaner — just less flexible.

For the broader comparison of annuity versus drawdown, see annuity vs drawdown.

Annuity timing is one of the decisions the government's free Pension Wise service was set up to help with. Anyone aged 50 or over with a defined contribution pension can book a free appointment to talk through their options before committing.

This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.