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If you’re considering using some or all of your retirement savings to buy an annuity, or income for life, you’ll want to know how long you’ll need to live before you start receiving more than you invested.
This is what’s known as your “annuity payback” time and is essentially the point at which you break even.
Here, we explain how annuities work and how long your payback period is likely to be given rising annuity rates over the past year.
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If you’re considering seeking professional financial advice on the options available to you, nationwide advice firm HUB Financial Solutions is offering you a free initial consultation with an expert retirement specialist. There’s no obligation; it’s to help you understand your options and how our services work. If you choose to receive paid-for regulated advice, we’ll explain how that works and the fees involved.
HUB Financial Solutions is rated ‘Excellent’ on Trustpilot (Mar 2026). With investing, your capital is at risk.
What is an annuity?
An annuity is a type of contract you make with an insurance company. In exchange for handing over some or all of your pension savings, you’ll receive a guaranteed income – either for the rest of your life or for a set period of time.
The amount you’ll receive depends on several factors, including:
- How much of your pension you use to buy the annuity
- Your age when you buy it
- Whether you’d like your income to increase each year
- Your health and lifestyle, which can affect the rate you’re offered
- Whether you want the annuity to continue paying out to your spouse, partner, or another beneficiary after you die.
You can find out more about how annuities work in our guide Annuities explained.
Annuities are affected by a variety of factors, such as UK government bonds (known as gilts) and interest rates. As gilt yields have risen this year, annuity rates have followed suit. According to Standard Life, the average annuity rate reached 7.65% in September 2025, a year-on-year increase of nearly 10%.
Who are annuities suitable for?
Annuities are generally suitable for those looking for security and stability and who want a guaranteed income for life.
However, if you’re looking for a bit more flexibility, and feel comfortable leaving your retirement savings invested, you might want to consider drawdown instead. This enables you to draw an income from your pension as and when you need to, rather than receiving a fixed amount each month. This means, for example, that in years when you might have other sources of income, perhaps from part-time work, you may decide to draw down a limited amount, which you could then increase if your part-time work ends.
You can learn more about drawdown in our guide What is pension drawdown and how does it work?
Bear in mind that it doesn’t have to be an either/ or decision and, depending on your current circumstances, you may find that a mix and match approach could be right for you. Find out more in our article Annuity vs drawdown: which is right for you?
When will an annuity start paying back more than you put in?
Based on current annuity rates, a 65-year-old retiree using a £100,000 pension pot to buy an annuity would begin receiving more than they put in once they reach the age of 78, Standard Life’s calculations show.
In other words, after around 13 years, the 65-year-old would have received back the full value of their original £100,000 investment, and any payments beyond that would effectively be profit.
They could expect to receive an annual income of up to £7,650, which is £670 more than they would have received in September 2024, when the average annuity rate stood at 6.98%.
Pete Cowell, Head of Annuities at Standard Life, said: “Annuity rates remain strong and continue to offer valuable income certainty for retirees, following a slight dip since May. Notably, at today’s rates, a 65-year-old would need to live to 78 to break even – almost a decade earlier than during the rate lows. In addition, around half of customers could qualify for an enhanced annuity, unlocking even higher income and a shorter payback period.”
Of course, the exact payback period you can expect will depend very much on your individual circumstances, so it’s worth seeking professional advice if you’re unsure.
How much total income can you expect from an annuity?
The total amount you can expect an annuity to provide you with over the course of your lifetime will obviously depend on how long you live, but the table below shows the expected overall income an annuity could provide for a male and female based on current annuity rates and average life expectancy.
For example, a healthy 60-year-old male who bought an annuity in September 2025 at a rate of 7.65% could expect a total lifetime income of £170,000, rising to £188,000 for a female the same age.
Meanwhile, a healthy 70-year-old who bought an annuity in September 2025 could expect a higher rate of 8.38%. This would provide a total lifetime income of £134,000, while a woman could expect to receive £151,000.
Mr Cowell said: “It’s important to remember that annuities offer flexibility and can be tailored to suit different retirement needs. While some people might prefer the certainty of a lifetime annuity, others might choose to keep part of their savings in reserve, and you don’t have to annuitise your entire pension pot. Meanwhile, for those who want to adjust their spending more regularly, a fixed-term annuity can provide a way to secure income over the short term, giving retirees the security of knowing their bills will be met while providing an element of flexibility.”
| Total expected income: male (September 2025) | |||
| 60 | £170,000 | ||
| 65 | £154,000 | ||
| 70 | £134,000 | ||
| Total expected income: female (September 2025) | |||
| 60 | £188,000 | ||
| 65 | £171,000 | ||
| 70 | £151,000 | ||
Source: Standard Life
*Based on a pension pot of £100,000. Total expected income figures are based on life expectancy statistics from the Office of National Statistics, based on the age annuity is first purchased.
A final thought…
If you’re not sure whether an annuity is right for you, or how other options for drawing an income from your pension work, the Government’s Pension Wise service offers people aged 50 and above free guidance on their pension choices at retirement.
It’s worth using Pension Wise as a starting point, but if you want professional financial advice tailored to your particular situation, you’ll need to speak to a financial advisor. Find out more in our article How to find the right financial advisor for you.
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If you’re considering seeking professional financial advice on the options available to you, nationwide advice firm HUB Financial Solutions is offering you a free initial consultation with an expert retirement specialist. There’s no obligation; it’s to help you understand your options and how our services work. If you choose to receive paid-for regulated advice, we’ll explain how that works and the fees involved.
HUB Financial Solutions is rated ‘Excellent’ on Trustpilot (Mar 2026). With investing, your capital is at risk.
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