By clicking a retailer link you consent to third-party cookies that track your onward journey. This enables W? to receive an affiliate commission if you make a purchase, which supports our mission to be the UK's consumer champion.
More and more retirement savers are shopping around when it comes to purchasing their annuities.
Annuities turn your pension savings into a guaranteed income for life, and by using the open market rather than sticking with your existing provider, you could secure a higher income at a time when rates remain competitive.
Here, Which? outlines how to get the best annuity rate and how shopping around can leave you considerably better off in retirement.
Speak to HUB Financial Solutions to help you compare the options available across the whole market.
Find out moreIf you take out an annuity as a result of using the service from HUB Financial Solutions, Which? will earn a commission to help fund its not-for-profit mission.
If you take out an annuity as a result of using the service from HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission.
Recent data from the Financial Conduct Authority’s (FCA) retirement income market series highlights that 62% of annuities taken out in 2024-25 were purchased with a new company by customers after shopping around.
This represents a significant increase since 2021-22, when only 42% of products were purchased from a different provider at retirement.
Rules changes introduced in 2019 require pension providers to show existing customers how their own annuity quote compares with the best available on the market. This will have led to more switching.
The 62% of policies bought on the open market were either arranged by people themselves (40%) or via professional brokers or advisers (22%).
Among annuity buyers with pensions worth £50,000 or more, the proportion switching providers was higher still at 68%.
Sticking with their current provider, which was still the case with 38% of sales in 2024-25, puts customers at risk of missing out on better rates available elsewhere on the market.
Sales of annuities have had a boost over the last couple of years driven by high interest rates, which have boosted annuity rates, and volatility in the investment markets.
There were 88,430 new sales of annuities in 2024-25 – up from 60,383 in 2020-21.
Once you've bought an annuity you can't reverse the process, so it's important to take the time to choose the right deal for you.
The actual amount of income you'll receive each year from an annuity in return for your pension savings depends on the rate you're offered. Annuity companies consider the broader economic picture as well as your personal circumstances when pricing an annuity.
The income level you get depends on the quote or rate that you receive from the annuity provider (given as a percentage, eg 6% of your fund a year) and the amount you're converting into an annuity (your initial pension pot).
Figures from the Standard Life Annuity Rates Tracker show that the average rate for a healthy 65-year-old in September was 7.65%, compared to 6.98% a year earlier.
Providers typically fund these products using returns from government bonds (known as gilts), which are considered low-risk investments. When the base rate is high, gilt yields tend to inflate, which in turn pushes up annuity rates.
The best annuity rate currently on offer for a healthy 65-year-old with an initial pension pot of £100,000 is £7,742 per year, which is 10% higher than the lowest rate (£7,017).
Opting for the lowest rate could mean that you lose out to the tune of £725 per year or an extremely significant £18,125 over the course of a 25-year retirement.
The FCA data also shows that half of annuity buyers received ‘enhanced’ rates after disclosing health and lifestyle information.
If you're in poor health, smoke or are overweight, you may be eligible for an enhanced annuity – which pays a higher income based on a shorter life expectancy.
Quotes run by Which? Money in June 2025 for a 65-year-old in relatively poor health, with a £100,000 pension pot, showed an enhanced annuity paid between 6% (Legal & General) and 15% (Aviva) more than a standard annuity.
The calculations were for an overweight smoker who is taking medication for high blood pressure and high cholesterol.
For this reason, it's important not only to shop around but also to declare any health conditions to your provider.
The latest figures from the FCA show that only 29% of those who arranged an annuity in 2024-25 took regulated financial advice.
There are several ways to get advice or support if you aren’t confident of making a decision on your own:
Find out more: how to get pension advice and guidance for your retirement
