Annuity rates February 2026: What are they and current rates

Marc Shoffman

Mon, February 16, 2026 at 8:48 PM GMT+9 5 min read

Shot of a happy older woman relaxing on the sofa with her digital tablet at home

Pension annuities are back in the spotlight. Following a surge in rates last year, the Association of British Insurers (ABI) revealed the total value of premiums paid into individual pension annuities rose 4pc in 2025, to £7.4bn.

In May 2025, the average annuity rate rose to 7.72pc, according to Standard Life – this is compared to an average rate of 4.71pc in July 2020.

While rates haven’t remained at this peak, there is still a lot of interest in the pension products.

While market volatility can cause pain for many retirees relying on drawdown income, it’s not a problem for annuities, as they pay a fixed income for life when once you retire.

However, this must be weighed up against the range of other, more flexible ways to withdraw funds – plus, amid the prospect of interest rates falling in future, the income provided from annuities may start to become less appealing.

Here is what you need to know about annuity rates:

What are annuity rates?

The best annuity rates of February 2026

What impacts annuity rates?

What are annuity rates?

Simply put, an annuity rate tells you how much you will get per year from the annuity you buy. For example, if you spent £100,000 on an annuity and the rate was 2pc, you would receive £2,000 a year. If it was 5pc, you would receive £5,000 a year.

Annuities were once the go-to product for retirees before pension freedom rules were introduced in 2015.

From age 55 (rising to 57 in 2028), you can use the value of your pension pot to purchase a fixed income for life from dedicated providers through an annuity. Many people appreciate the financial security this provides, as you’ll know how much you will receive on a regular basis and can therefore plan ahead.

However, it can also be restrictive because once you purchase the annuity, you are stuck with the rate you received. This is unlike pension drawdown, where you can alter how much you withdraw and the rest stays invested.

David Cooper, director of retirement specialist Just Group, said: “An annuity converts retirement savings into a guaranteed stream of regular income that is payable for life, just like a monthly or weekly salary that never stops.

“Retirees can use some or all of a defined contribution pension pot to buy an annuity. The income is not affected by financial market fluctuations, so can enhance financial security in retirement.”

The best annuity rates of February 2026

The best annuity rate will vary depending on the value of your pension pot, the provider and your own personal information.

We asked retirement broker HUB Financial Solutions to crunch some numbers to get an idea of how much someone aged 65, 70 and 75 could generate from a £100,000 pension pot when purchasing an annuity. The quotes are based on someone living in the BN2 postcode in England.

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A 65-year-old could turn a £100,000 pension pot into an annual income of £7,526.04 by purchasing a single annuity from Canada Life. This changes to £8,747.28 from Aviva if they have a medical condition, such as lifelong asthma in this scenario.

Older people can often access higher annuity rates. For example, that same £100,000 pot could generate an annual income of £9,210 from an annuity for a 75-year old with Standard Life, or £11,213.40 with Aviva if there is a disclosed medical issue.

However, note that rates can vary and will change regularly.

What impacts annuity rates?

Rates are impacted by a range of factors, such as:

Your age

Where you live

Your health and lifestyle

Any medical conditions

The size of your pension pot.

There is no set rate, so what you are offered will depend on your individual circumstances. There are also different types of annuities and they can determine the rate you receive. These include single life annuities, which only pays you. Alternatively, a joint life policy will provide an income for a spouse, civil partner or dependant after you die – but it will either pay less or cost you more to buy.

There are also level annuities, which always pay the same regardless of how long you live, or more expensive versions that rise with inflation to protect your income.

Annuity rates tend to rise – and fall – in line with interest rates and gilts. This has benefited retirees taking out annuities over the past couple of years as Bank Rate rose to a peak of 5.25pc in 2023. While the Bank Rate has fallen since then, the process is happening gradually, as shown in the chart below.

Matt Sheach, financial consultant at Lumin Wealth, said annuity rates had risen substantially from the lows seen between 2016 and 2021. He said: “This has made them a more appealing proposition for retirees who wish to benefit from the safety net of a guaranteed income during their retirement.

“With annuity rates offering good value for money over the past couple of years, savers may opt to lock into an annuity, with the anticipation that rates will fall over the coming months and years, in light of expected interest rate drops.”

As with any financial product, it is important to shop around and to not just accept the quote on offer from your pension provider.

Mr Cooper added: “Rates vary between annuity companies, so it is important to shop around for the best deal yourself or to use an independent annuity broker or regulated financial adviser to advise on the options available.”

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