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HOW TO MAXIMISE YOUR PENSION WITH AN ANNUITY Annuities are popular, and rates are good — but do shop around, advises Paul Lewis
THINKING OF ACCESSING YOUR PENSION? Get a guaranteed 7.8 per cent* income for life from your pension Whether retirement is approaching or still some years off, it can be worthwhile taking time to understand how much income your pension savings could provide. Many people underestimate their pension’s potential, and without comparing options across the market, may miss the opportunity to secure a significantly higher income in later life. How much income could you receive? Below are some sample annuity rates for someone who has a £150,000 pension pot remaining, having already taken the permitted tax-free cash* . Annuity rates vary depending on individual circumstances and once a lifetime annuity is set up, it is irreversible.
emand for annuities is growing. Nearly 90,000 people spent a total of £7 billion to buy one in 2024, the highest D volume in a decade. An annuity is basically a simple product. You give an insurance company a large amount of money. In return it gives you a guaranteed income for life – however long that is. Annuity rates are good just now, nearly two- thirds more than you’d have got a few years ago. A pension fund of £100,000 can buy a healthy 65-year-old a guaranteed income for life of around £7,700 a year. If you have ill health or you smoke, the amount you get will be higher. There are choices to be made. Do you want your annuity to be flat-rate for the rest of your life or to rise each year with inflation? That would make the initial payment about a third lower. Do you want a partner or heirs to continue to get the annual payment if you die within a few years? You can protect an annuity for up to 20 years at relatively little cost – about £450 a year on a £100,000 fund for a healthy 65-year-old. But if you die within the 20 years, some of it may be liable to inheritance tax.
At the moment, pension funds are exempt from inheritance tax, but from April 2027 any pension fund that is still unused and is not left to a spouse or civil partner will face potential tax of 40 per cent. If you’re 75 or more when you die, your heirs – including a spouse – will also pay income tax when they take the money out. That means a total tax take typically ranging from just over half to around two-thirds of the fund, in some rare cases even more. The tax will apply from 6 April 2027 to any unused funds at death, including those in drawdown – a scheme where you take a regular income or irregular amounts from your invested pension fund. Buying an annuity means there is no money left in the fund to be liable to inheritance tax but annuities are taxable as income. Information on these choices is free at moneyhelper.org.uk – search “annuities”, or call them on 0800 011 3797. If you ask a regulated adviser, make sure they are independent and an annuity specialist. There will be fees to pay. QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com . I cannot answer you personally, but I will reflect them in this column.
Why annuities are back in demand Annuities are once again attracting interest from people approaching retirement, largely because they offer a guaranteed income for life. After a long period of low interest rates, annuity rates have improved, meaning retirees may now secure a higher income from the same level of pension savings. What often surprises people is how widely rates can vary between providers. For an identical pension pot, some annuities can pay significantly less than others, making it essential to compare options carefully before committing.
To request your FREE no-obligation Pension Report, call 0808 531 0586 or visit radiotimes.com/annuity or scan the QR code * Rates are quotes based on March 2026, a 66-year-old male, £150k pension with 25% tax-free cash taken and some options taken and medical conditions. Rates will depend on individual circumstances. The Radio Times Pension Service is provided by Pense Limited. Radio Times is a trading name of Immediate Media Company London Limited, which is an Introducer Appointed Representative of Pense Limited, 1 Derwent House, Richmond Business Park, Sidings Court, Lakeside, Doncaster DN4 5NL. Pense Ltd is authorised and regulated by the Financial Conduct Authority number 231629.
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RadioTimes February 2026
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