State pensioners aged over 75 can get an extra £9,740 on average paid out to them each year on top of their DWP state pension payments. This income comes from annuities, a product pensioners can buy using their private pension pot, usually built up from work, which converts pension savings into a guaranteed annual income until death.
How annuities work
Life insurance firm LV explains: “A pension annuity is a lifetime annuity you can buy using the money from your pension pot. It will pay you an income for the rest of your life. To be able to receive a pension annuity, you must be at least 55 years old and have at least £2,000 to invest after you’ve taken any tax-free cash.”
Annuities invest your money, allowing it to continue to grow, while balancing your life expectancy against the cost of taking it out. Like life insurance, annuities weigh up your age, lifestyle and health factors to determine how much to pay out each year, as well as the amount in your private pension.
Average payouts for over-75s
According to SharingPensions.co.uk, retirees aged 75 and over can, as of September 6, 2026, get £9,740 per year paid out by an annuity on average. This is based on current rates and assumes a pension pot of £133,000 before tax for an individual pensioner with no 'level rate guarantee'.
Tax and limitations
LV says there are downsides to annuities – they are, like the pension pot itself, subject to tax. They also cannot be changed or surrendered later, so you need to be sure before proceeding as there is no going back and getting your money back if you change your mind.
LV adds: “The pension annuity cannot be cashed in or surrendered at any time. Purchasing a pension annuity is a once and for all decision. The options you select when you buy the annuity cannot be changed later on. Annuity payments are classed as income and are subject to income tax, and could affect any state benefits you claim – it is worth seeking advice from a financial professional to see what income tax you may be liable for. Depending on how long you live, you may receive less than you paid for your annuity. Ensure you outline any medical conditions you or your partner have as it may mean you receive a higher annuity income.”
