State pensioners aged 77 and over can receive up to £8,509 in additional annual income on top of their Department for Work and Pensions (DWP) state pension payments, driven by rising annuity rates. An annuity rate measures the income generated from an annuity, typically expressed as an annual percentage of the purchase cost. For example, a £100,000 annuity with a 2% rate yields £2,000 per year, while a 6% rate yields £6,000, and a 10% rate yields £10,000.
Improved Annuity Rates Boost Income
Legal & General advises that annuities have become significantly more attractive as pension annuity rates have increased. According to the firm, UK pension savers can now secure a higher guaranteed income compared to purchasing an annuity a few years ago. As of 15 June 2026, Legal & General's latest annuity rate stands at 7.01%. Based on a pension pot of £100,000, this rate translates to an annual income of £8,509 for a single 75-year-old with no health issues.
Factors Affecting Annuity Rates
The actual rate offered depends on personal circumstances, including age, health, and location. Different providers also offer varying rates, making it essential to shop around. The type of product and optional features selected—such as inflation-linked growth or survivor benefits—can lower the starting income. Once an annuity begins, the rate and chosen options are fixed and cannot be changed.
LV adds: “The pension annuity cannot be cashed in or surrendered at any time. Purchasing a pension annuity is a once and for all decision. The options you select when you buy the annuity cannot be changed later on.”
Tax and Benefit Considerations
Annuity payments are classified as income and are subject to income tax. They may also affect state benefits claimed. It is advisable to seek guidance from a financial professional to understand potential tax liabilities. LV also notes: “Depending on how long you live, you may receive less than you paid for your annuity. Ensure you outline any medical conditions you or your partner have as it may mean you receive a higher annuity income.”
