An annuity rate is the percentage of your pension pot that an insurer will pay you as income each year for the rest of your life. It looks generous next to a savings rate and it is not the same kind of number, because part of every payment is your own capital coming back to you. Understanding that difference is most of what you need to read a quotation sensibly.
Why an annuity rate is not an interest rate
A savings rate pays you a return and leaves your capital intact. An annuity rate pays you a return and gradually returns the capital itself, and it keeps paying after the capital would have run out, because the insurer has pooled your money with everyone else's and is carrying the risk that you live a long time. That pooling is the product. It is why an annuity rate is higher than a deposit rate at the same moment, and why comparing the two directly tells you nothing useful about either.
What actually moves the rate
Two forces dominate. The first is the yield on long dated government and corporate bonds, because that is broadly what the insurer buys with your money to back a promise it must keep for decades. When those yields rise, annuity rates rise with them, usually within weeks. The second is longevity: the insurer's view of how long people like you will live. That view changes slowly and it differs between insurers, which is why several firms quoting on the same day still produce a spread rather than a single price.
Why your own rate differs from the headline
A published rate is a shop window figure for a particular age, a particular shape and a healthy life. Your rate reflects your age at purchase, whether the income continues to a partner, whether it rises each year, whether you want a guarantee period, and what your health disclosure shows. An enhanced rate for someone with a qualifying condition can be materially above the headline, and a joint escalating annuity will start well below it. Neither is an error; they are different products priced correctly.
Where this site stops
This page explains how the rate is arrived at. It does not publish live rates, does not tell you when to buy and does not recommend an insurer, and it holds no view on whether an annuity suits your circumstances. Those are regulated matters. Where you ask, the enquiry reaches a firm authorised to advise and arrange, and this site is paid for the introduction rather than for directing you to any particular provider.
Questions people ask about annuity rates
Why are annuity rates higher than savings rates?
Because an annuity payment is not pure return. It includes the gradual repayment of your own capital, and the insurer continues paying after that capital would have been exhausted, funded by pooling longevity risk across many people. The two rates measure different things and are not comparable.
Do annuity rates change often?
Yes. They follow long dated bond yields fairly closely, so they can move within weeks, and a quotation therefore has a short shelf life. Comparing a figure from last month with one from today measures the market moving rather than one insurer being better than another.
Can I get a better rate because of my health?
Possibly. An enhanced annuity pays more where medical or lifestyle factors shorten expected life, and the uplift can be significant. Insurers differ considerably in what they treat as relevant, which is why the same disclosure produces different offers and why shopping around matters most for people who qualify.
Does this site publish current annuity rates?
No. Live rates come from insurers and move constantly, and publishing a figure we cannot verify on the day would be worse than publishing none. This page explains what drives the rate so that a real quotation can be read properly.