Annuity Laddering: Should You Buy Your Annuity in Stages Rather Than All at Once?

UK annuity rates are sitting near their highest levels in almost two decades. A healthy 65-year-old can currently secure around £7,880 a year for life from a £100,000 pension pot on a single-life level basis — a world away from the dismal rates of the 2010s. With numbers like that, the temptation is obvious: take your whole pot, buy an annuity, and lock in a guaranteed income for the rest of your life.

But annuitising your entire pension in one go, on a single day, is not your only option — and it may not be the smartest one. A strategy known as annuity laddering lets you buy your guaranteed income in stages over several years, rather than betting everything on one rate at one moment. Here is how it works, where it can pay off, and the important trade-offs to weigh before you decide.

What is annuity laddering?

Annuity laddering means buying several smaller annuities at different points in your retirement — for example at 65, then 70, then 75 — instead of converting your whole pot into a single lifetime annuity all at once. The money you have not yet annuitised typically stays invested in flexi-access drawdown, where it can continue to grow and remain accessible.

If you have ever come across "pound-cost averaging" when investing, the logic is similar. Rather than committing everything at a single price, you spread your purchases across time to smooth out the effect of changing rates — and, crucially, to take advantage of a quirk that works in your favour as you age.

Why buying in stages can pay off

1. Annuity rates rise as you get older

This is the engine behind laddering. The older you are when you buy an annuity, the higher the income you are offered — because the insurer expects to pay it for fewer years. The difference is significant. On a £100,000 single-life level annuity, illustrative market rates in 2026 look roughly like this:

• Age 60: around £6,990 a year
• Age 65: around £7,880 a year
• Age 70: around £8,680 a year
• Age 75: around £10,000 or more a year

By delaying part of your purchase from 65 to 75, the same £100,000 could buy you roughly a quarter more guaranteed income each year. Laddering lets you capture those higher later-life rates on part of your pot while still securing some certainty early on.

2. Your health may unlock a better rate later

Annuity rates are not just about age. If your health deteriorates — or you develop conditions such as high blood pressure, diabetes or a heart condition — you may qualify for an enhanced annuity, which can pay up to around 40% more than a standard rate. If you annuitise your entire pot at 65 while in good health, you lock yourself out of that possibility. Staging your purchases keeps the door open to a higher income if your circumstances change.

3. You are not betting everything on one day's rate

Annuity rates move constantly — they can shift by as much as 1% in a single week as gilt yields change. Annuitising your whole pot on one day means your lifetime income is fixed by whatever the market happened to be doing that morning. By spreading purchases over several years, you diversify the rates you lock in, reducing the risk of committing everything at an unlucky low point.

4. You keep flexibility and legacy in the meantime

An annuity is generally irreversible — once bought, you cannot undo it. Money left in drawdown, by contrast, stays flexible: you can vary your income, take ad-hoc lump sums, and it can normally be passed to your beneficiaries when you die. (Bear in mind that from April 2027, most unused pension funds are due to fall within your estate for inheritance tax, so the legacy picture is changing.) Laddering lets you enjoy some of that flexibility for longer while gradually building a guaranteed income floor.

The catch: why buying earlier can still win

Laddering is not a free lunch, and it is important to understand the counter-argument. Although rates are higher at older ages, buying earlier means you collect payments for longer. For many people, total income over a lifetime is actually higher if they annuitise earlier, because every year you wait is a year of guaranteed income you did not receive.

There are other trade-offs too:

• Investment risk: the money you have not yet annuitised stays exposed to markets. A poor run of returns in early retirement — known as sequence of returns risk — could leave you with less to annuitise later.
• Rates could fall: there is no guarantee that today's near-record rates will still be on offer when you come to buy your next tranche. You are taking a view that higher age-related rates will outweigh any market decline.
• Less certainty now: until your whole pot is annuitised, part of your income is not guaranteed for life.
• More admin: each purchase means shopping around again, comparing providers and completing another application.

A worked example

Imagine you reach 65 with a £400,000 pension pot (after taking any tax-free cash) and want a blend of security and flexibility.

The all-at-once approach: annuitising the full £400,000 at 65 might secure roughly £31,500 a year, guaranteed and level for life, from day one.

The laddered approach: you might instead annuitise £100,000 at 65 (around £7,900 a year), another £100,000 at 70 (around £8,700 a year), and a third £100,000 at 75 (around £10,000 a year, potentially more if your health qualifies you for an enhanced rate). The final £100,000 stays in drawdown for flexibility and legacy. By 75 you would have built a guaranteed income of around £26,600 a year from £300,000 — plus a flexible drawdown pot still sitting on top.

The all-at-once route gives you more guaranteed income immediately. The laddered route starts lower but builds up, captures higher later-life rates, keeps part of your pot flexible, and leaves room to benefit from enhanced terms. Neither is automatically "better" — it depends on how much certainty you need now versus later, and your appetite for investment risk in the meantime. You can model different income paths using our pension drawdown calculator.

Is annuity laddering right for you?

This strategy tends to suit people who:

• Have a larger pension pot that can comfortably be split into tranches (providers often set minimum purchase amounts of £5,000–£10,000);
• Want some guaranteed income now but value keeping part of their savings flexible;
• Believe their health may decline, opening the door to enhanced rates later;
• Are comfortable with investment risk on the portion that stays in drawdown.

It is likely to be less suitable if you have a smaller pot, need the maximum possible guaranteed income from day one, or would lose sleep over market movements affecting your un-annuitised savings. It also sits close to the broader hybrid annuity-and-drawdown approach, which is worth reading alongside this. A fixed-term annuity is another way to keep your options open if you are not ready to commit for life — we cover those in our guide to fixed-term annuities.

Whichever route you consider, always use the open market option — shop around rather than simply accepting your existing provider's offer, as rates vary widely between insurers. And remember that the shape of the annuity matters as much as the timing: choosing between a level or escalating annuity will shape how your income keeps pace with rising prices.

Key takeaways

• Annuity laddering means buying guaranteed income in stages across your retirement, rather than annuitising your whole pot at once.
• Rates rise meaningfully with age, so later tranches can buy more income — and poor health may unlock enhanced rates of up to 40% more.
• Staging purchases spreads rate risk and keeps part of your pot flexible and accessible.
• The trade-off: buying earlier can produce more total lifetime income, and money left in drawdown carries investment risk.
• Laddering tends to suit larger pots and those who want a balance of security and flexibility.

Annuity laddering is a powerful way to combine the certainty of guaranteed income with the flexibility of drawdown — but the right mix depends entirely on your pot size, your health, and how much risk you are willing to take. This article is general information, not personalised financial advice. Because an annuity purchase is usually irreversible, it is well worth speaking to a qualified financial adviser before you commit. You can also explore your options with our retirement planner or compare drawdown providers using our comparison tool.