Guide
What moves annuity rates, and what moves your quote
Updated
Two different things get called the annuity rate. One is a market number that moves with gilt yields. The other is what a provider will actually pay you, which is mostly about you. Confusing them is why people wait for rates to improve while ignoring the larger lever.
The market half
Providers back annuity promises largely with government bonds, so the income they can offer follows gilt yields. Those move with interest rate expectations, and Bank Rate itself has moved recently: 4.25% in May 2025, 4.00% in August, and 3.75% from 18 December 2025.
This is the part outside your control. It is worth understanding because it explains why quotes have a short shelf life, and why a quote you were given weeks ago may no longer stand.
The personal half, which is usually larger
Age, health, lifestyle and postcode all feed the income a provider will offer. An enhanced annuity, reflecting a shorter expected life, can pay materially more than a standard one.
The catch is that a provider cannot offer an enhancement for something it has not asked about. Conditions people do not think of as serious, and ordinary lifestyle facts, can qualify. Answering a full medical questionnaire is the highest-value hour in this process.
Why your own provider is rarely the answer
The pension provider holding your pot has no obligation to offer you the best available annuity, and frequently does not. Exercising the open market option, buying from whoever quotes best, is the single most reliable way to increase the income.
That is not a recommendation of any provider. It is an argument for getting more than one quote, which costs nothing.
Timing
Deferring purchase raises the rate simply because you are older, and it also means fewer payments. Whether waiting is sensible depends on your other income, your health and your view of rates, which is a personal question rather than a general one.
This is precisely the sort of decision to take with regulated advice, and gov.uk sets out how to find it.