Inheritance tax changes and higher interest rates are encouraging more people to annuitise later in life, according to research by Standard Life.
The provider says it has seen the proportion of annuity quotes requested by customers aged over 75 more than quadruple since 2024, as retirement planning behaviour shifts ahead of inheritance tax changes. Unused pension pots will come into the scope of inheritance tax from April next year.
The provider said over-75s accounted for 5.5% of annuity quotes year-to-date in 2026, up from 1.3% in 2024. It has also seen an increase in higher-value cases, with quotes worth more than £1m more than doubling over the same period.
It added that while attractive annuity rates are increasing demand, inheritance tax planning is also becoming a bigger driver.
Since the pension freedoms were introduced, financial advisers have typically recommended that wealthier clients should leave pensions untouched for as long as possible, as they could be passed on in a tax-efficient way.
However, new inheritance tax (IHT) rules mean that an estimated 10,500 estates will start paying IHT from next year, and around 38,500 estates will face higher IHT bills than under previous rules.
“The forthcoming inclusion of pensions within inheritance tax is prompting many to revisit how they use their pension savings, and annuities are one of a number of options available.”
Pete Cowell, Standard Life
As a result, advisers and their clients are looking for ways to reduce their potential tax liabilities. An annuity purchase reduces the value of an individual’s estate, and the resulting income can then be used or gifted under the gifts from surplus income rules.
The Standard Life research showed that 39% of financial advisers expected annuities to become more popular because of the changes. The provider said this was also being reflected in case sizes, with the average annuity premium rising 14% year-on-year, from around £91,000 in 2025 to more than £100,000 so far in 2026.
Pete Cowell, head of annuities at Standard Life, said: “We’re seeing growing demand from older customers as well as an uplift in larger annuity cases, reflecting how retirement needs and planning behaviours are evolving.
“The forthcoming inclusion of pensions within inheritance tax is prompting many to revisit how they use their pension savings, and annuities are one of a number of options available.
“While multi-million-pound annuities are still a minority purchase, the market is experiencing strong demand due to the combination of income certainty and attractive rates. Rates are currently at historically strong levels, reaching post-pension freedoms highs in May.”
