State pensioners aged 70 and over can receive an average of £8,433 a year from an annuity on top of their DWP state pension, according to retirement specialists Standard Life. The firm’s annuity tracker, updated with July 2026 data, shows rates have climbed to an 18-year high, increasing the income available to pensioners who buy an annuity alongside their state pension.
An annuity is a product bought with a private pension pot, usually built up from a workplace pension or savings, which converts pension savings into a guaranteed annual income until death.
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.”
How annuities work
Annuities keep the money invested so it can continue to grow, while balancing life expectancy against the amount spent on the product. Similar to life insurance, annuity providers weigh up age, lifestyle and health factors, along with the size of the private pension, to determine how much is paid out each year.
According to Standard Life, retirees aged 70 and over can get an average of £8,433 per year from an annuity, based on current rates and assuming a pension pot of £100,000 before tax.
Rates at an 18-year high
Pete Cowell, Head of Annuities at Standard Life, said: “Annuity rates have reached 7.75% [for over 65s], the highest rates since August 2008, underlining just how much the retirement income landscape has shifted in recent years.
“At today’s rates, the time it takes to receive back your initial investment has significantly shortened. The payback period for a £100,000 annuity purchase with a rate of around 5% in 2020 would have taken around 20 years to repay. However, with today’s rates closer to 7.75%, that falls to around 13 years, depending on individual circumstances.”
Standard Life adds: “According to the Tracker, a healthy 65-year-old male who bought an annuity in July 2026 at a rate of 7.75% could expect a total lifetime income of £156,000. For a female of the same age, the expected income was £177,000.
“Meanwhile, a healthy 70-year-old who bought an annuity during the same period could expect a rate of 8.43%. For a man, this would provide a total lifetime income of £135,000 while a woman could expect to receive £155,000.”
That means a healthy 70-year-old could expect a payment of up to £8,430 per year based on the latest 8.43% rate from Standard Life.
Things to consider before buying an annuity
LV says annuities have some drawbacks: they are subject to tax, like the pension pot itself, and they cannot be changed or surrendered later, so it is a decision that cannot be reversed.
“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.”
