Pension annuity calculator

What is an annuity?

An annuity lets you convert some or all of the money in your defined contribution pension into guaranteed taxable income. The income can last for the rest of your life (a lifetime annuity) or for a fixed amount of time, such as five or ten years (a fixed-term annuity). MoneyHelper says you can pick a fixed term of 1 to 40 years.

Types of annuity

• Level (fixed) income stays the same each year.
• Increasing (escalating) income rises each year, at a set rate or in line with inflation. Fixed or level annuities will usually give you a higher income at the start than increasing ones.
• Joint-life: an annuity will usually stop paying when you die, unless you choose a joint-life annuity, which pays a portion of your income to your dependants after you die.
• Value protection pays beneficiaries a lump sum if the annuity has paid out less than it cost when you die.
• A guarantee period pays beneficiaries an income for up to 30 years after you die, or a lump sum of that value.

You will usually get a lower income for each protection you add on.

What affects how much you get

How much of your pension you convert, how long the payments last, whether the income rises each year, and the provider's rate. That rate is based on your age, health and where you plan to live, plus current interest rates and other market factors. Enhanced (or impaired life) annuities may pay more if you have a medical condition, are overweight or smoke, have certain jobs such as manual labour, or live where life expectancy is lower.

Tax-free cash and tax

You can usually take up to 25% of your pension as a tax-free lump sum, subject to the lump sum allowance, which is £268,275 for most people in 2026/27. You do not have to take the full 25%, or any at all. Income from an annuity counts when working out your Income Tax, and providers usually deduct it using your tax code.

Income tax rates for 2026/27 in England, Wales and Northern Ireland:

Scotland has different income tax rates and is not covered by this calculator.

Shop around before you buy

GOV.UK says you do not have to buy an annuity from your pension provider. MoneyHelper suggests checking whether you can get a better deal from another provider. You can use MoneyHelper's annuity comparison tool, get quotes by contacting annuity providers directly, or pay a financial adviser, who may be able to access better rates than you can directly.

Be sure before you buy

Most annuities have a 30-day cooling-off period. Once that has ended, you typically cannot change your mind or cancel.

Other ways to take your pension

GOV.UK lists taking cash, buying an annuity or using flexi-access drawdown. Thinking about drawdown instead? Try the pension drawdown calculator.

What this calculator does not include

• Joint-life, value protection, guarantee period, fixed-term and enhanced annuities. Enter the quote for the one you are considering.
• Defined benefit pensions.
• The State Pension, unless you enter it as other income.
• Scottish income tax.
• Tax changes in later years.
• Provider charges or advice fees.

Frequently asked questions

Sources

Read how we keep calculators accurate, or browse all UK calculators.