Should an annuity be purchased in tranches?

Rates for annuities are at their highest point in years

However, purchasing gradually as opposed to all at once solves less than it seems to.

With monthly contributions they hardly notice, the majority of people gradually accumulate an investment portfolio over several decades.

In an annuity, the opposite is true. Because it is purchased in a single transaction and cannot be reversed, buyers frequently struggle with timing. Is now the right time, or is it better to wait for higher gilt yields, given that annuity rates are at an 18-year high?

It can significantly impact your decision to purchase an annuity. In January 2022, a healthy 65-year-old with £100,000 purchased £4,521 annually using Canada Life's benchmark. The same 100,000 purchased 6,873 by the end of September 2022. For the remainder of their lives, those who waited nine months received an additional £2,352 annually.

However, 2022 was not a typical year, and nobody can predict the future.

Monitoring annuity rates.

The best income a healthy 65-year-old could purchase with £100,000 is tracked monthly by UK consumer champion Which? February was the worst month to purchase in 2025, at 7,525 per year. June had the highest number, 8,011. December's closing number was 7,665. The annual difference between the best and worst was 486 for a lifetime.

Now, however, contrast the providers. The most generous on the market offered 7,649 on the same 100,000 in January 2026. The least giving person gave 7,100.

By gathering quotes, you can bridge the provider gap. However, you are unable to close the timing gap. Setting your income for life can only be stopped one day.

Annuity rates carry no such expectation, but drip-feeding into stocks typically makes you worse off than buying the entire lot at once because shares are expected to rise and uninvested money misses the climb.

Purchasing in phases protects against an unpredictable change in interest rates. Spreading the purchase over multiple dates ensures that no single morning's pricing determines the entire income, but it won't make you any better off than a single purchase would.

In 2017, Huang, Milevsky, and Young solved the issue in the Review of Finance. If you give a buyer a fixed budget, increase the rate offered by about a tenth, and make no other changes, the amount they should commit today will increase from about 5 percent to about 85 percent. This pattern is referred to by the authors as "an asymmetric dollar-cost averaging strategy." Since the product is a deferred annuity and the market is American, the patterns transfer but the numbers do not.

The dates are predetermined in Standard Life's model. Its saver buys at 65, 70, 75, and 80 whatever rates are doing, and it is the only comprehensive UK modeling of staged annuity purchase that I could find. From 6.6 percent of the pot at 65 to 7.0 percent at 70, 8.1 percent at 75, and 10.0 percent at 80, the rate increases with each purchase. The buyer is growing older in every way. Market pricing in the model is static. The benefits of distributing purchases across shifting conditions cannot be shown by a model where conditions are constant.

The saver for Standard Life begins at 150,000. A level annuity at age 65 is purchased for about 90,000, and another at ages 70, 75, and 80 with the remaining funds in drawdown. The model is predicated on 5% annual growth on that balance, 3% deduction from it, and overall health. That saver has taken out 259,115 by the time they are 90. At 65, a single purchase would have cost 253,775. This is 5,340 because Standard Life does not perform that deduction anywhere in the release.

That is a 2.1 percent increase in income over a 25-year period.

That 5,340 is paid up front by the staged buyer. The first year's income is 8,155 compared to 10,151 for a single purchasea fifth less. At 75, annual payments catch up. However, it takes some time to make up for a ten-year deficit, and the running total does not favor staging until 88. Since the model ends at 90, the final three payments contain the entire gain. By 80, the drawdown pot is empty, indicating that the flexibility being sold expires eight years before the funds are received.

The price of delaying purchasing an annuity.

The rate includes the cost of waiting. Because the insurer anticipates paying out over fewer years and because buyers who pass away early subsidize those who live longer, an annuity pays more at age 80 than it does at age 65. Money that is still in drawdown does not receive any portion of the subsidy. Instead, it waits in markets, taking a different kind of risk. Waiting since 65 has already paid off with a better rate at 80.

Can you divide the money in your annuity?

It's quite simple to split a pot. 250,000 is divided four ways by Aviva, Canada Life, Legal and General, and Standard Life, all of which set a minimum of 10,000 on what remains after tax-free cash.

The split's pricing is more complex. Customers are informed by Phoenix Life, which shares an underwriting company with Standard Life, that some providers might pay more for a single large purchase than for multiple smaller ones. It doesn't specify how much more. However, according to Standard Life's adviser website, an annuity is not likely to be suitable for a client who wants their savings to be kept invested for growth, which is what staging requires of them for 15 years. I am unable to locate a published estimate of the actual return on a UK annuity ladder.

However, one defense of staging endures. A condition that shortens life expectancy raises the rate because insurers base their pricing on it; therefore, a later purchase may qualify where an earlier one did not. Which? discovered that a 65-year-old with comparatively poor health received quotes from Legal and General that were six percent higher than the standard rate and from Aviva that were fifteen percent higher. It is real, but no one can make plans around it.

That's why the order matters. Get quotes first. In January 2026, there was a 549 annual difference between the best and worst providers, which is the only difference you can close in this decision. Next, determine if spreading a risk that no one can predict is worth paying a fifth less in income at age 65.

Staging is protection. It's a bad deal, sold as anything else.