Published and sources checked · UK tax year 2026/27
Compare the job each option does
| Question | Lifetime annuity | Drawdown |
|---|---|---|
| How long does income last? | For life under the contract. | While sufficient money remains. |
| Can income change? | Only as the purchased terms provide. | Withdrawals can usually change. |
| Who faces investment fluctuations? | Payments follow the contract. | The remaining pension remains exposed. |
| Can the original capital be accessed? | Usually not after purchase and cooling off. | The remaining fund can generally be withdrawn, subject to tax and provider rules. |
This comparison is about lifetime annuities. A fixed-term annuity pays for an agreed period and needs a separate assessment of what happens when that period ends.
Annuity features affect the starting income
An annuity can have a level income or specified increases. A level payment loses purchasing power if prices rise. An increasing payment follows the contract's formula, which may not exactly match your own rising costs.
Terms can include income for a surviving partner or guarantees on payments after death. These choices normally affect the starting amount. Health and lifestyle information may affect quotations too. Compare quotations using the same options, and check for any valuable guaranteed annuity rate in your existing pension before moving it.
Drawdown changes the question
With drawdown, the central question is how withdrawals interact with the remaining investments over time. An apparent annual return is not a promise, and a fixed percentage of the starting fund is not automatically sustainable. Charges, inflation and market falls need to be considered alongside flexibility.
Managing drawdown also involves continuing decisions. The practical issue is not just whether payments can change, but whether household spending could change if investment outcomes were disappointing. Our drawdown guide gives a simple example of withdrawals during market falls.
Comparing options on a shared basis
Illustrative, not advice: a £6,000 annuity quotation and a £6,000 planned drawdown withdrawal are both annual cash amounts, but they are not equivalent promises. The annuity has contractual conditions and may use up access to the capital; the drawdown figure is a withdrawal decision supported by a changing fund.
For a useful comparison, specify the same amount of pension money, whether tax-free cash has been taken, the treatment of inflation, and provision for a partner. Include other secure income so the comparison reflects the role this pension would play in the household budget.
It is possible to use some pension money for guaranteed income and keep some invested. This guide explains the differences; it does not establish which allocation would suit an individual.
Common questions
Must I choose the same option for all my pensions?
No. Subject to provider rules, different pots or portions of a pot can support different income methods. The combined tax and income position still needs consideration.
Does the highest starting annuity income mean the best match?
Not necessarily. Different quotations can have different increases, survivor payments and guarantees. Compare equivalent terms before drawing a conclusion.
Sources
Checked 7 October 2026. The linked sources are the authority for rules and eligibility.