Quick answer: An annuity converts your pension pot into a guaranteed income for life — certainty, but you give up the capital. Drawdown keeps your pot invested and you withdraw flexibly — control and inheritance, but you bear the investment risk. Most UK retirees in 2026 do best with a hybrid: an annuity covering essential bills, drawdown for everything else.
Side by side
| Annuity | Drawdown | |
|---|---|---|
| Income certainty | ✓ Guaranteed for life | ✗ Depends on returns |
| Flexibility | ✗ Locked in | ✓ Withdraw any amount |
| Inheritance | Limited | ✓ Full pot passes on |
| Investment growth | None | ✓ Can keep growing |
| Sequence-of-returns risk | Eliminated | Real, especially early |
When an annuity wins
- You need a guaranteed income floor and don't have enough State + DB pension to cover essentials
- You're not a confident investor and won't want to manage a portfolio in your 80s
- You expect above-average longevity (annuities are longevity insurance)
- A spouse depends on continued income (use a joint-life annuity)
When drawdown wins
- State Pension + any DB pension already cover your essential spending
- Inheritance for your family matters
- You're comfortable with investment risk or have an adviser
- You may need occasional lump sums
The hybrid approach (what most should do)
- Total your essential annual spend
- Subtract guaranteed income (State Pension + DB)
- Buy an annuity to cover the remaining essential gap
- Keep the rest in drawdown for discretionary spending and inheritance
2026 annuity rates (indicative)
| Age | Single, level | Single, RPI-linked |
|---|---|---|
| 60 | ~6.3% | ~4.2% |
| 65 | ~7.2% | ~5.0% |
| 70 | ~8.5% | ~6.0% |
Annuity rates rose sharply with interest rates and are far better value than in 2018–21. Always shop around and declare health conditions — an enhanced annuity can pay 10–30% more. Use our annuity calculator for an estimate.
Common mistakes
Buying the first annuity quote (always shop around), not declaring health, going 100% drawdown with no cash buffer (sequence risk), and choosing single-life when a partner depends on the income.
Frequently asked questions
Neither is universally better. Annuity wins on certainty and longevity protection; drawdown wins on flexibility, inheritance and growth potential. Most retirees benefit from a hybrid — annuity for essential income, drawdown for the rest.
At age 65 in 2026, a level single-life annuity from £100,000 pays approximately £7,000-£7,500/year. Drawdown at 4% pays £4,000/year initially, intended to grow with inflation.
Yes — you can use part of your drawdown pot to buy an annuity at any age. Many people do this around age 75-80 when annuity rates are higher and longevity becomes a bigger concern.
Yes. Annuity rates rose sharply with interest rates and remain attractive at 7%+ at 65. For someone needing certainty, annuities are far better value than they were in 2018-2021.
Drawdown pots pass to your nominated beneficiaries. If you die before 75, they receive the pot tax-free. After 75, beneficiaries pay income tax at their marginal rate when withdrawing. From April 2027, pension pots may also count for inheritance tax — check our IHT guide.