State pensioners aged over 70 can get an extra £8,765 on average paid out to them each year on top of their DWP state pension payments.

Annuities are a product which pensioners can buy using their private pension pot (usually built up from work) which converts your savings for retirement into a guaranteed annual income until you die.

As explained by life insurance firm LV: “A pension annuity is a lifetime annuity you can buy using the money from your pension pot. It will pay you an income for the rest of your life. To be able to receive a pension annuity, you must be at least 55 years old and have at least £2,000 to invest after you’ve taken any tax-free cash.”

Annuities keep your money invested, which allows it to continue to grow, while also balancing factors such as your life expectancy and the money you put into them.

A bit like life insurance, annuities weigh up your age, lifestyle and health factors to determine how much to pay out each year, as well as the amount you have in your private pension.

According to SharingPensions.co.uk, retirees aged 70 and over can get £8,765 per year paid out by an annuity on average, based on current rates and assuming a pension pot of £133,000 before tax.

SharingPensions founder Colin Thorburn set out that this is a golden period for annuities, which are at an 18-year high.

He said: “Annuity rates are at an 18-year high increasing up to 118% for certain ages and annuity features since the recent low in December 2021. Annuities are currently higher as gilt yields reached an over 20 year peak of 5.60% on 15 May 2026.”

LV says about annuities that there are some downsides. They are, like the pension pot itself, subject to tax.

They also cannot be changed or surrendered later, so you need to be sure you want one before you proceed as there’s no going back.

It adds: “The pension annuity cannot be cashed in or surrendered at any time.

“Purchasing a pension annuity is a once and for all decision. The options you select when you buy the annuity cannot be changed later on. Annuity payments are classed as income and are subject to income tax, and could affect any state benefits you claim – it is worth seeking advice from a financial professional to see what income tax you may be liable for.

“Depending on how long you live, you may receive less than you paid for your annuity.

“Ensure you outline any medical conditions you or your partner have as it may mean you receive a higher annuity income.”