Annuity vs Drawdown Calculator 2026/27
When you reach retirement, you face one of the most significant financial decisions of your life: buy a guaranteed annuity or enter flexible drawdown. An annuity gives you certainty -- a fixed income for life regardless of investment markets. Drawdown keeps your pot invested and gives you flexibility, but your income can run out if the markets fall or you live longer than expected. This calculator shows you the breakeven age, total lifetime income from each approach, and what remains at different ages, so you can make a more informed comparison.
Annuity vs drawdown: the key differences
An annuity is a contract with an insurance company. You hand over your pension pot and in return receive a guaranteed income for life. The income is fixed (or inflation-linked if you pay extra), and once purchased the decision cannot be reversed. Drawdown keeps your pot invested and lets you take withdrawals as and when you need them.
When annuity tends to suit better
Annuities suit people who want certainty above all else, who are concerned about outliving their savings, who have no other income aside from the state pension, or who have health conditions that qualify for an enhanced annuity rate. If you have dependants who would lose income on your death, a joint-life annuity can provide continuing income.
When drawdown tends to suit better
Drawdown suits people in good health, with other income sources providing a floor, who are comfortable with investment risk, and who want the flexibility to vary withdrawals or leave remaining funds to beneficiaries. The key risk is sequence of returns -- a bad run of investment returns early in retirement can permanently impair a drawdown pot.
| Factor | Annuity | Drawdown |
|---|---|---|
| Income certainty | Guaranteed for life | Variable, pot may run out |
| Flexibility | None once purchased | Full control |
| Inheritance | Usually nothing left | Remaining pot passes to heirs |
| Investment risk | None (insurer takes it) | You bear all market risk |
| Longevity risk | None (insurer pays for life) | Pot may run out if you live long |
Frequently asked questions
Neither is universally better. An annuity provides guaranteed income for life and suits people who want certainty. Drawdown gives flexibility and keeps the pot invested, suiting those in good health who want to manage their own income and leave remaining funds to beneficiaries. The right choice depends on your health, other income sources, attitude to risk, and whether you need certainty over flexibility.
A standard level annuity for a healthy 65-year-old buying with a £100,000 pot typically provides around £6,000 to £7,000 per year in 2026. Enhanced annuities for those with health conditions can pay significantly more. Always compare quotes from multiple providers via the Money and Pensions Service comparison tool.
Yes. You can purchase an annuity at any age using your remaining pension pot, even if you have been in drawdown for several years. Many people use a hybrid approach: taking flexible drawdown in early retirement while waiting to buy an annuity at a later age when rates are more favourable.
If you die before age 75, your remaining drawdown pot can typically be passed to beneficiaries free of income tax. If you die aged 75 or over, beneficiaries pay income tax on what they receive at their own marginal rate. From April 2027, unused pension funds will also be brought within the scope of inheritance tax.
A standard single-life annuity stops paying on your death with nothing left for beneficiaries. A joint-life annuity continues paying a reduced income to a surviving spouse. A guarantee period ensures payments continue for a set number of years even if you die early. These options reduce the annual income compared with a single-life level annuity.
Disclaimer: This calculator provides illustrative projections only. Drawdown projections assume constant growth which will not reflect real market conditions. Annuity rates shown are illustrative. Always seek regulated financial advice before making irreversible retirement income decisions.