A £400,000 pension pot will buy a 65-year-old roughly £26,800 to £30,800 a year on a single-life, level annuity with no extras, based on rates available in early 2026. Take the standard 25% tax-free lump sum first and the remaining £300,000 buys around £20,100 to £23,100 a year. The spread is wide because rates differ sharply between providers, and your own quote will move with your age, health, postcode, and the features you add to the contract. So the short answer to what annuity £400,000 will buy in the UK is somewhere in that range, and the choices you make around it decide where in the range you land.
Where the Headline Numbers Come From
Annuity rates are quoted as annual income per £100,000 invested. In March 2026, a healthy 65-year-old buying a single-life, level annuity with no death benefits could expect between about £6,700 and £7,700 per year for every £100,000, depending on the provider. Scottish Widows sat at the top of the range at around £7,710 per £100,000; Just offered roughly £6,709. Multiply by four for a £400,000 pot and you get £26,800 to £30,800 before tax.
Those figures assume you convert the whole pot, take no inflation protection, no survivor benefit, and no guarantee period. Every one of those add-ons cuts the starting income, sometimes heavily. The payout is locked in on the day you buy, and what the market offers that week is what you live with for life.
Taking the 25% Tax-Free Cash First
Most people take some cash before the annuity starts. You can withdraw up to 25% of your pension tax-free, subject to a lifetime lump sum allowance of £268,275 across all your pension arrangements.1GOV.UK. Taking Higher Tax-Free Lump Sums With Protected Allowances On a £400,000 pot, 25% is £100,000, which sits comfortably under the cap.
The remaining £300,000 then buys the annuity. Using the same March 2026 rate range, that produces roughly £20,100 to £23,100 a year. You do not have to take the full 25%. Taking less cash and putting more into the annuity raises your guaranteed income permanently. This is a one-time decision at the point of purchase, so modelling a few scenarios is worth the time.
What Changes Your Personal Rate
Age
Older buyers get more per year because the insurer expects to pay out for fewer years. A 70-year-old will receive noticeably more from the same pot than a 60-year-old. If you are in your late fifties and can afford to wait, a couple of years of delay can make a real difference to the annual income.
Health and Lifestyle
This is where people most often leave money behind. A serious health condition such as heart disease, diabetes, or cancer, or factors like smoking or a high body mass index, can qualify you for an enhanced annuity. Enhanced rates reflect a shorter statistical life expectancy, so the insurer can pay more each year. The FCA requires firms to explain how your personal circumstances might affect the retirement income you could get on the open market.2Financial Conduct Authority. COBS 19.4 Open Market Options Many retirees still never disclose their conditions and accept a standard rate. Complete the health questionnaire in full, including medications, diagnoses, and any surgeries.
Postcode
Insurers use your postcode as one input to life-expectancy modelling. If you live in an area with lower-than-average life expectancy, the rate offered may be slightly higher. The effect is modest on its own, but it stacks with the other factors.
Gender
UK insurers are required to offer the same annuity rates to men and women, so gender is not a factor in the quote you receive.
Structural Choices That Trade Income for Protection
The headline rate is for the simplest product: single-life, level, no extras. Every feature you add improves protection and lowers the starting income.
- A level annuity pays the same amount every year. An escalating annuity rises each year, either by a fixed percentage (often 3%) or in line with CPI or RPI. The starting income on an escalating annuity might be 20-30% lower than a level one.
- A single-life annuity stops paying when you die. A joint-life annuity continues paying a portion, typically 50% or two-thirds, to a surviving spouse or partner. If someone depends on that income, the reduction is usually worth it.
- A guarantee period keeps payments going for a minimum term, usually five or ten years, even if you die early in the contract. Without one, the insurer keeps the remaining fund if you die shortly after buying.
- Value protection returns a portion of the original purchase price to beneficiaries if you die before the insurer has paid out a set amount. It works like a partial refund on the capital and reduces the annual income accordingly.
Once the contract is finalised, these choices are permanent. You cannot switch from single-life to joint-life later, and you cannot add inflation protection after the fact.
What Inflation Does to a Level Annuity
A level annuity paying £28,000 today will still pay £28,000 in fifteen years, but £28,000 will buy less. The Office for Budget Responsibility forecasts CPI inflation at 2.3% for 2026, falling to around 2.0% from 2027 onward.3GOV.UK. Economic and Fiscal Outlook March 2026 At 2% annual inflation, £28,000 loses about a quarter of its purchasing power over fifteen years and roughly a third over twenty.
An escalating annuity fixes this, but the lower starting income means the early retirement years, when many people want to travel and be more active, are the ones you spend less in. Some retirees split the pot, buying a level annuity with part and an escalating one with the rest, or pairing an annuity with drawdown to balance certainty against flexibility.
Tax on Annuity Income
Annuity income is taxable earnings. Your provider deducts income tax through PAYE using the tax code HMRC assigns you.4HM Revenue & Customs. EIM75300 – The Taxation of Pension Income: Annuities Chargeable to Tax as Pension Income You do not need to file a self-assessment return just because you receive an annuity, unless you have other untaxed income.
For 2025/26 and 2026/27, the personal allowance is frozen at £12,570. In England, Wales, and Northern Ireland, income above that is taxed at 20% up to £50,270, 40% from £50,271 to £125,140, and 45% above £125,140.5GOV.UK. Income Tax Rates and Personal Allowances Scotland applies its own bands, starting at a 19% starter rate and rising through 20%, 21%, 42%, 45%, and a 48% top rate.6Scottish Government. Scottish Income Tax 2026 to 2027: Technical Factsheet
In practice, your annuity stacks on top of any other income. If your annuity pays £28,000 and you also receive the full new State Pension of about £12,548, your combined income is roughly £40,548. After the £12,570 allowance, about £27,978 is taxed at the basic rate in England, producing a tax bill of around £5,596 and leaving about £34,952 after tax. The exact figure depends on your tax code and any other income.
How the State Pension Sits Alongside
Your annuity does not replace the State Pension. For 2026/27, the full new State Pension is £241.30 per week, or about £12,548 per year.7GOV.UK. Benefit and Pension Rates 2026 to 2027 Not everyone qualifies for the full amount; it depends on your National Insurance record, with 35 qualifying years needed for the full rate and a minimum of 10 years for anything at all.
If you retire before State Pension age, the annuity will be your only guaranteed income for a while. When the State Pension starts, your total income rises and so does your tax bill, because HMRC treats both as taxable. Planning for that jump before it happens avoids a surprise when the new tax code arrives.
Drawdown Instead of, or Alongside, an Annuity
Since the April 2015 pension freedoms, buying an annuity is optional. The main alternative is flexi-access drawdown, where the pension stays invested and you withdraw as needed.8HM Revenue & Customs. Drawdown Pension Rules Applying From 6 April 2015 Drawdown gives you control over how much you take and keeps the remaining fund exposed to potential growth. The risk is real: money can run out if markets fall or you withdraw too quickly, and you carry that risk yourself.
Many people with a £400,000 pot use both. Putting £200,000 into an annuity to cover essential bills and keeping £200,000 in drawdown for discretionary spending gives a baseline of guaranteed income while preserving access to funds and the option to leave something behind. There is no single right split; it depends on your health, risk tolerance, other income, and what you want to pass on.
Getting the Best Rate on Your £400,000
The gap between the best and worst annuity rate on the market can be over £1,000 a year for every £100,000 invested. Across a 20-year retirement, that reaches tens of thousands of pounds. You are not obliged to buy from your existing pension provider, and in most cases you should not. This right to compare is called the open market option, and the FCA requires providers to tell you about it and quantify how much more you might get by switching.9Financial Conduct Authority. PS17/12: Implementing Information Prompts in the Annuity Market
MoneyHelper, the government-backed money guidance service, runs a free annuity comparison tool that pulls quotes from all providers on the market.10MoneyHelper. Compare Annuities: Get a Guaranteed Retirement Income Because it does not earn commission, the results are unbiased, and it is the best starting point for seeing what your £400,000 or £300,000 would produce across insurers and product types.
If you are 50 or over with a defined contribution pension, you can also book a free Pension Wise appointment by phone or in person. Pension Wise walks you through annuities, drawdown, and taking cash. It is guidance rather than regulated advice, but it is thorough and impartial. Call 0800 138 3944 to book.
For a pot this size, a regulated financial adviser can model scenarios you might not spot yourself and identify enhanced rates or product features that suit you. Expect to pay upward of £3,000 as an initial fee, with some firms charging a percentage of the fund. The fee is significant, but the difference between the right and wrong annuity choice over 20 years is larger.
Practical Steps to Buy
Before requesting quotes, gather your pension provider’s name and policy number, a recent valuation, your full health history including medications and diagnoses, and your spouse’s date of birth and health details if you want a joint-life annuity. Accuracy on the health questionnaire is not optional. Understating conditions can cost you hundreds of pounds a year for the rest of your life.
Once you have compared quotes, the process is quick. You tell your current provider to transfer the fund to the chosen insurer. The insurer sends a formal application covering your details, health, and chosen structure. Pension transfers through the Origo Transfer Service averaged just over 10 days for straightforward cases in 2025, so the timeline from application to fund arrival is usually a few weeks.
After the transfer and application go through, a 30-day cooling-off period begins during which you can cancel and get your money back.11MoneyHelper. Take Your Pension as a Guaranteed Income: Annuities Explained After that, the contract is permanent. Your first payment typically lands about a month after the transfer completes, with income tax already deducted through PAYE.4HM Revenue & Customs. EIM75300 – The Taxation of Pension Income: Annuities Chargeable to Tax as Pension Income