Purchased Life Annuity

An Immediate Life Annuity, sometimes called a Purchased Life Annuity pays a regular, guaranteed income for the rest of your life or for a temporary annuity for a fixed period of between 2 and 20 years. It is bought from your own capital, as opposed to a pension fund, so can be used in conjunction with the tax free cash from a vested pension to annuitise the whole of your pension plan.


The income derived from a Purchased Life Annuity will usually be higher than interest available from banks or building societies. However, it is not affected by the rise and fall of interest rates, so you can plan with confidence. However, at the end of the term of the annuity or on death, there is normally no return of capital, whereas money deposited with a bank or building society would be safe.

A purchased life annuity may be a suitable option if no access to the capital is required in the future. Income is usually less compared to a pension annuity however the tax benefits can be more favourable. These types of annuity are taxed very differently from the annuity purchased by your pension plan. This is because some of the income derived from the Purchased Life Annuity is deemed to be a return of your original capital and so is tax free and the balance is taxed as savings income at the rate of 20%. Your gross income payments are made up of two parts, a 'capital' part and an 'interest' part. The capital part is treated as a return of your capital and so is not taxed. The Life Office will normally pay the interest part of the annuity after deducting tax at source at the savings rate of 20%. You may need to pay more or less than this, depending on your tax rate.

The options available from a Purchased Life Annuity are very similar to those available to the options available for an annuity purchased by a pension fund. You can index the payments to increase so that they keep pace with inflation, you can select spouse's or partner benefits and you can select the frequency of payments. You can also select capital protection, which means that if you have not received annuity payments equal to the amount you originally invested, the Life Office will return the balance if you die during the term of the annuity.

Before taking out a Purchased Life Annuity, it is essential that you consider other investment vehicles which would also be suitable for someone looking to generate income. This would include investment bonds, ISAs and some National Savings products.

Minimum investment amounts for a Purchased Life Annuity varies according to the Life office, but tends to be in the region of £5,000. Maximum investment amounts rarely exceed £500,000.

The minimum age for a Purchased Life Annuity is 55. Most Purchased Life Annuity providers have a maximum age of 85.

Purchased Life Annuity rates

To give you an idea of how Purchased Life Annuity rates vary, please refer to the tables below.

Single Life Purchased Life Annuity,£10,000 invested, level, no guarantee, monthly in arrears:

Male 70 Annuity Female 70 Annuity
Aviva 709.00 Aviva 691.00
Standard Life 645.00 Standard Life 628.00
Canada Life 623.00 Canada Life 603.00

Single Life Purchased Life Annuity, £10,000 invested, escalating at 5%, no guarantee, monthly in arrears:

Male 70 Annuity Female 70 Annuity
Aviva 392.00 Aviva 386.00
Standard Life 387.00 Standard Life 367.00
Canada Life 366.00 Canada Life 356.00

Joint Life last survivor - no reduction on first death - Purchased Life Annuity, £10,000 invested, level, no guarantee, monthly in arrears:

Male 70/ Female 70 Annuity Male 75/ Female 70 Annuity
Aviva 592.00 Aviva 625.00
Standard Life 536.00 Canada Life 571.00
Canada Life 521.00 Standard Life 552.00

Joint Life last survivor - reducing by a third on male death - Purchased Life Annuity,£10,000 invested, level, no guarantee, monthly in arrears:

Male 70/ Female 70 Annuity Male 75/ Female 70 Annuity
Aviva 659.00 Aviva 708.00
Canada Life 574.00 Standard Life 631.00
Standard Life 569.00 Canada Life 618.00

Purchased Life Annuity Quotations

Click here to request a Purchased Life Annuity quote.

Key Features Documents for Purchased Life Annuities:

For product provider literature on Purchased Life Annuities, please refer to:

Inland Revenue form for Purchased Life Annuities:

To reclaim tax paid on Purchased Life Annuities, please refer to: