Should I take pension drawdown or buy an annuity?
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In short: Use an annuity if you need a guaranteed income for life and want to remove investment risk; use drawdown if you can tolerate market ups and downs and want flexibility or to pass money on. Many people annuitise enough to cover essentials and keep the rest in drawdown.
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Reviewed by Kaiser Khan
An annuity converts part or all of your pension pot into a guaranteed income for life. Once bought, the rate is locked in — you cannot change your mind after the cooling-off period. Enhanced annuities pay more if you disclose health conditions.
Drawdown keeps your pot invested. You take income when you choose and can leave the remainder to beneficiaries — though from April 2027 most unused defined contribution pensions will count for Inheritance Tax.
A common approach is an 'income floor': buy an annuity that, with the State Pension, covers essential spending, and leave the rest in drawdown for holidays, gifts and inheritance. Use our pension drawdown calculator and annuity income estimator to model both.
Primary source: gov.uk/plan-retirement-income
Part of our Pensions & retirement
This quick answer sits inside our wider pensions & retirement hub — with sub-guides, calculators and step-by-step explainers on the same topic.
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