Estimate your annual and monthly annuity income from your pension pot based on age, health status, and annuity type.
This calculator provides estimates based on approximate 2026 annuity market rates. Actual annuity rates vary by provider, health, and market conditions. The tax-free lump sum is subject to the lump sum allowance. Always obtain quotes from multiple annuity providers and consult a qualified pension adviser before making irreversible decisions.
A pension annuity converts your pension pot into a guaranteed income for life. When you reach retirement age (currently 55, rising to 57 in 2028), you can use your defined contribution pension to purchase an annuity from an insurance company. The amount of income you receive depends on the size of your pension pot, your age, your health, the type of annuity you choose, and prevailing market rates. This calculator estimates the annual and monthly income you could expect from an annuity purchase, taking into account the 25% tax-free lump sum, age-based annuity rates, health status adjustments for enhanced annuities, and optional inflation protection. It provides a starting point for understanding how much retirement income your pension pot could generate, helping you compare annuity income against other options like pension drawdown.
To estimate your pension annuity income: 1. Enter your total pension pot. This is the current value of your defined contribution pension fund. If you have multiple pensions, you can either combine them or calculate separately. 2. Enter your age at retirement. Annuity rates improve with age because the insurance company expects to pay out for fewer years. The minimum age is currently 55. 3. Select the annuity type. A single life annuity pays only you. A joint life annuity continues paying your spouse or partner after your death, but at a reduced rate, typically around 50-67% of the original income. 4. Select your health status. If you have medical conditions such as diabetes, heart disease, or cancer, or if you smoke, you may qualify for an enhanced annuity which pays a higher income. Always disclose your full medical history when obtaining quotes. 5. Toggle inflation protection if you want your income to increase each year. This reduces the starting income but protects against inflation eroding your purchasing power over a long retirement. 6. Review the results. The calculator shows your tax-free lump sum, the amount used to purchase the annuity, and your estimated annual and monthly income. The pie chart shows the split between your lump sum and annuity purchase.
The calculator works in several steps: Tax-free lump sum = 25% of pension pot, capped at GBP 268,275 (the lump sum allowance for 2026-27). Annuity purchase amount = pension pot minus tax-free lump sum. The base annuity rate is determined by age using approximate 2026 market rates: 4.5% at age 55, 5.2% at 60, 6.0% at 65, 6.5% at 67, 7.2% at 70, and 8.5% at 75. Rates are linearly interpolated between these reference points. Adjustments are then applied to the base rate. Joint life annuities reduce the rate by 15%. Poor health (enhanced annuity) increases the rate by 20%. Good health reduces it slightly by 3%. Inflation protection reduces the rate by 25%. Estimated annual income = annuity purchase amount multiplied by the adjusted annuity rate divided by 100. Monthly income = annual income divided by 12. For example, a GBP 300,000 pension pot at age 65 with average health: tax-free lump sum is GBP 75,000, annuity purchase is GBP 225,000, base rate is 6.0%, giving an estimated annual income of approximately GBP 13,500 or GBP 1,125 per month.
Annuity rates vary significantly between providers, so it is essential to shop around using the open market option. The Financial Conduct Authority (FCA) requires your pension provider to tell you about your right to shop around. The Money and Pensions Service (MoneyHelper) provides free impartial guidance on retirement options. Since the pension freedoms introduced in 2015, purchasing an annuity is no longer the only option. You can also choose pension drawdown (keeping your pension invested and withdrawing as needed), take your pension as cash (subject to income tax), or use a combination of approaches. Annuity income is taxed as earned income under PAYE. If the income from your annuity plus your state pension and any other income exceeds your personal allowance (GBP 12,570 for 2026-27), you will pay income tax on the excess. The annuity rates used in this calculator are approximate and based on typical market rates. Actual quotes will depend on the specific provider, your exact health details, and market conditions at the time of purchase. Enhanced annuity rates can be significantly higher for conditions such as diabetes, heart conditions, cancer, and smoking. Always obtain multiple quotes and consider consulting a regulated financial adviser before making an irreversible annuity purchase.