Larger pension pots helped push total premiums paid into individual annuities up 4% to £7.4 billion in 2025, marking the highest annual level since pension freedoms were introduced in 2014, according to the Association of British Insurers (ABI).
The increase came despite a small decline in the number of annuities sold, which fell 2% year on year to 87,600, as more people annuitised larger pension pots to secure an income for life.
Meanwhile, sales of annuities over £250,000 rose by 31%, while those valued at over £500,000 climbed 54%. This drove the average annuity value to £84,000, surpassing £80,000 for the first time and marking a 7% annual increase.
The higher premium values were accompanied by an 8% rise in the number of people aged 70 and over purchasing an annuity.
The ABI noted that one of the strongest areas of growth by product type was escalating annuities, suggesting that customers are increasingly seeking protection against the erosion of income over time, including through inflation-linked options. Sales of escalating annuities rose to just over 18,000 in 2025, up 10% from 2024 and the highest level recorded since 2013.
Rob Yuille, Assistant Director, Head of Long-Term Savings, said, “A striking feature of this year’s data is the increase in the size of pots being annuitised, paired with people choosing to secure a regular income at older ages. It’s always been a good idea to ‘flex then fix’, using savings flexibly in early retirement, then locking in a guaranteed income at higher rates when certainty matters most. Now, with pensions coming in scope of inheritance tax from April 2027, choosing an annuity means a guaranteed income for life, with the option of providing for loved ones without worrying about potentially penal tax impacts.”
In addition, the ABI highlighted that bulk annuity activity continued at scale in 2025, with £38.3 billion of defined benefit schemes secured by insurers, providing long-term security for 332,500 people.
Although premiums were lower than in 2024 (£47.3 billion), the sustained number of people gaining long-term pension security through bulk purchase annuities remains significant.
Yuille added, “Insurers bring scale, which means they can provide support for pension scheme members throughout retirement, and support for the economy through investment in housing, infrastructure and lending to UK businesses and government. With economic and policy conditions continuing to shift, a stable and clearly defined regulatory framework following the Pension Schemes Bill is essential to give schemes and their members confidence in a secure retirement.”
