You Hand Over £100,000 at 65. They Pay You £7,936 Every Year Until You Die. The Annuity Is Not the Rip-Off — the Stock Market Is.

These are not projections. These are live annuity quotes from the UK's leading providers, compiled by Hargreaves Lansdown on 2 July 2026, for a £100,000 pension pot:

At 65, a level annuity delivers £7,936. A joint-life version — so your spouse keeps getting 50% after you die — pays £7,341. An RPI-linked annuity that protects your purchasing power against inflation starts lower at £5,304 but escalates every year.

Scale these numbers up. A £300,000 pot at 65 buys £23,808 a year, level. Add the full new State Pension of roughly £11,502 and you are looking at £35,310 of guaranteed, index-linked (at least partly) annual income. For a couple with two state pensions and a joint-life annuity on a £500,000 pot, you are north of £58,000 a year — guaranteed — before either of you has touched an ISA.

That is not 'settling'. That is wiring your retirement income directly to the full faith and credit of UK-regulated insurance companies.

Scale these numbers. A £300,000 pot buys £23,808 a year at 65, level. A £500,000 pot buys £39,680. Add the full new State Pension of roughly £11,502 and a couple with two state pensions and a joint-life annuity on a £500,000 pot are looking at over £58,000 of guaranteed annual income before either has touched an ISA. That is not settling — that is a retirement funded entirely by contracts, not hope.

Drawdown advocates talk about 'flexibility' and 'staying invested'. What they mean is: you bear the sequence-of-returns risk alone, in your seventies, when you cannot go back to work.

Here is the scenario that keeps drawdown retirees awake. You retire at 65 with £500,000. You withdraw £25,000 a year — 5%, because anything less doesn't cover your costs. Year one, markets drop 20%. Your £500,000 is now £375,000 after withdrawals. Year two, they drop another 10%. You are down to £310,000. You now need to withdraw £25,000 from a £310,000 pot — that is an 8% withdrawal rate. The arithmetic becomes terminal.

This is not theoretical. It happened to anyone who retired in 2000. It happened to anyone who retired in late 2007. It happened, in a more compressed form, in March 2020. And it will happen again — the only question is whether it happens to you.

The annuity line is flat. The drawdown line collapses. That is the difference between a contractual guarantee and a hope.

For a deeper dive into how drawdown works — and why the flexibility argument often collapses under real market conditions — see our complete guide to pension drawdown.

An annuity provider takes your £100,000 and buys government bonds — UK gilts currently yielding 4.8%. They also pool your money with thousands of other annuitants. Some will die at 72. Others will live to 98. The provider uses actuarial data to calculate how long the average 65-year-old will live, and prices the annuity so that those who die earlier effectively subsidise those who live longer. That subsidy is called the 'mortality credit' — and it is the reason an annuity can pay 7.94% when gilts only yield 4.8%.

You cannot replicate the mortality credit in drawdown. You are a sample size of one. You might live to 100, in which case your pot runs dry. You might die at 71, in which case you never spent most of it. The annuity solves for both outcomes — you get the income for as long as you live, and the insurer absorbs the longevity risk across thousands of lives.

The Bank of England base rate has held at 3.75% since December 2025. If it falls — and with CPI now at 2.6%, pressure to cut is building — annuity rates will fall with it. The window for locking in 7.94% is open now. It will not stay open forever.

For more context on how gilt yields drive annuity pricing, read our explainer on annuities in 2026. Our pensions hub covers the full range of retirement income options.

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The standard critique of level annuities is inflation risk. Fair. A level £7,936 in 2026 will buy less in 2046. At 2.6% inflation, its purchasing power halves in roughly 27 years. If you are 65, that takes you to 92.

But the critique is incomplete. First, you do not have to buy a level annuity. An RPI-linked annuity at 65 pays £5,304 initially on £100,000 — less upfront, but it rises with inflation every year. At 3% average RPI, it overtakes the level annuity around age 82. After that, it wins — and it keeps winning for as long as you live.

Second, the state pension is triple-locked — it rises each year by the highest of CPI, earnings growth, or 2.5%. That is your inflation hedge, built in. The annuity is the base layer, the state pension is the escalator.

Third, you still have your ISA. MoneyHelper recommends treating guaranteed income as the foundation layer, your downsizing proceeds, your part-time income. The annuity does not need to cover everything. It covers the non-negotiables — council tax, energy, food. The stuff that keeps you awake. Everything else can be variable.

The drawdown salesman's favourite line: 'With an annuity, your family gets nothing when you die.' This is true only if you buy the cheapest possible single-life level annuity with no guarantee period.

A five-year guarantee costs almost nothing. And the annuity itself is protected — the FSCS covers 100% of long-term insurance claims with no upper limit. — at 65, a level annuity with a five-year guarantee pays £7,875 versus £7,936 without. That £61 difference buys your estate five years of payments if you die within the first five years. A joint-life 50% annuity — your spouse gets half your income for life after you die — pays £7,341. That is a 7.5% haircut for spousal protection.

You can also buy a 'value protection' annuity that returns the unused capital to your estate. These exist. They cost more, but they exist.

The point is: annuity death benefits are a design choice, not a binary feature. You pay for what you want. The same is true of drawdown — except in drawdown, your beneficiary's tax treatment depends entirely on whether you die before or after 75. Under 75, they can inherit the pot tax-free. Over 75, they pay income tax on withdrawals at their marginal rate. The annuity's death benefits are at least predictable.

If you are weighing annuity against drawdown, our pension calculator lets you model both scenarios with your actual pot size and retirement age.