An annuity calculator does one job: it turns a pot of money into a yearly income for life. Everything else it asks you is there because it changes that conversion. The useful thing to understand before you use one is that the calculator does not set the rate. An insurer does, on the day, and it reprices as long term yields move, so the number you get is a well informed estimate rather than an offer.
The four inputs that move the answer
Age comes first, because an annuity is priced on how long the insurer expects to pay. A later start means fewer expected payments and a higher yearly income from the same pot. Second is the shape: single life or joint, level or escalating, with or without a guarantee period. Third is health and lifestyle, which can raise the income through an enhanced annuity. Fourth is the pot itself, and it is the only one most people think about. Change the first three and the same pot returns materially different figures, which is why two calculators can both be right and disagree.
Why the pot you enter is usually not the whole pension
Most people take the tax free cash first and buy an annuity with the rest. HMRC's guidance on GOV.UK states that you can usually take up to 25 percent of a pension as a tax free lump sum, subject to a lump sum allowance of 268,275 pounds. If you intend to take that cash, the figure to enter is the pot after it has gone, not before. Entering the whole pension and then taking the lump sum as well is the most common way a calculator result turns out to be a quarter higher than the income that actually arrives, and it is a mistake of sequence rather than of arithmetic.
What the number is and is not
The output is gross annual income before tax. Money taken from a pension is taxable as income in the year you receive it, so what reaches your account depends on your other income that year. The output is also not a quotation. An insurer only commits when it has your details, your health disclosure and a date, and its price reflects the yields available that week. Treat a calculator as a way to test decisions against each other, single against joint, level against escalating, rather than as a promise of a figure.
What this site does with the answer
This page explains the calculation and nothing more. It does not tell you whether an annuity is the right thing to do with your pension, does not arrange one and does not recommend an insurer, because those are regulated activities and this site does not perform them. Where you ask to be put in touch, the enquiry goes to a firm authorised to advise on and arrange the purchase, and this site is paid as an introducer for the introduction rather than by any insurer for a placement.
Questions people ask about annuity calculator
Is an annuity calculator accurate?
It is accurate about the mechanics and indicative about the price. The conversion from pot to income follows fixed rules, but the rate an insurer will actually offer is set on the day and moves with long term yields, so a calculator result and a quotation taken a month apart can differ without either being wrong.
Should I enter my pot before or after the tax free lump sum?
After, if you intend to take it. HMRC's guidance on GOV.UK states you can usually take up to 25 percent of a pension as a tax free lump sum, and the annuity is bought with what remains. Entering the full pot and taking the cash as well overstates the income you would receive.
Why does a joint annuity pay less?
Because the insurer expects to pay for longer. A joint life annuity continues to a surviving partner after the first death, so the same capital has to fund two lives rather than one. The reduction at outset is the price of that continuing income, not a penalty.
Does the calculator account for my health?
Usually only if you tell it. An enhanced annuity pays more where medical or lifestyle factors reduce expected life, and insurers differ widely in what they count. That variation between insurers is the main reason to take real quotations rather than to rely on one estimate.