A deferred annuity is bought now and pays an income from a later date. This page covers how it works in the UK and what is known about deferred annuity rates.
The name covers two quite different things, and a search for rates tends to mix them up. Pension Wise, the free, impartial, government-backed guidance service from MoneyHelper, can explain your wider options. An FCA-authorised adviser can, by phone, set a deferred start against your own pension; to ask for that call, use the short form on this page. Nothing is charged for the enquiry.
Two meanings of “deferred”
In both, the rights are secured today and the income starts later. The difference is who arranged it and what it replaced.
A policy that stands in for a workplace pension. When a workplace scheme is wound up, or a member leaves and transfers their rights out, those rights can become an insurance policy that pays from retirement. This is the older meaning, and the one best described in the documents below.
An annuity bought with a pot, paying from a later date. Legal & General’s one-line description is that deferred annuities “let you delay the start date of your regular, guaranteed sum of money by a year or more”.
Leaving a pension in a workplace scheme without claiming it is neither. HMRC’s manual calls such a person a deferred member: someone with rights under a scheme who is neither an active member nor a pensioner member. The scheme pays the pension itself, and GOV.UK says it comes when you reach the scheme’s pension age. See final salary pensions.
The older kind: a deferred annuity contract bought out of a workplace scheme
HMRC’s Pensions Tax Manual defines a deferred annuity contract as a policy bought from an insurer with funds from a registered pension scheme, which “will provide an annuity to the member at some time in the future.” It stands apart from the scheme it came from, and is also known as a buy-out policy, because the member’s rights have been “bought out” of the scheme. The manual gives two examples of how rights end up in one: where “the employer’s scheme of which they were a member has been wound up and no longer exists, and members’ benefits were transferred out of the scheme before completion of the winding-up”, or where “the member left service with the employer whose scheme they were a member of, exercised their right to transfer their benefit rights out of the scheme, and chose to transfer to a deferred annuity contract rather than another employer’s scheme, personal pension, or stakeholder pension.”
Prudential, part of M&G, publishes pages for its existing customers who hold one of its Deferred Annuity plans. It describes the plan as “usually part of a defined benefit occupational pension scheme”, set up when the old workplace scheme was closed or changed, with payments that “begin when you decide to retire” once the plan’s minimum retirement age is reached. The amount is already decided and set out in the plan documentation, and if the original scheme was underfunded, the benefits insured may be less than those built up under it.
The same pages set out what M&G’s own plan holders can do; they are not general rules for every deferred annuity. On tax-free cash, they may be able to take a pension commencement lump sum, an option the pages say is only available before age 75. Spouse payments after death follow the original scheme rules. For holders who want to transfer out of the plan, the pages say that if the transfer value is over £30,000, advice from a regulated financial adviser is needed before the transfer can be paid; see transferring a pension and Pension Wise.
Buying one with your own pot: what the rules say about the wait
HMRC’s manual sets out when tax-free cash arises on a contract that pays later: “The purchase of an annuity contract that is not for the immediate provision of a lifetime annuity to the member will not give rise to a right to a pension commencement lump sum at the time of purchase. Such a right will only arise when benefits are first taken from the contract (when an actual entitlement to a pension arises).” It separates a ‘prospective right’ to payments at some future time from an ‘actual right’, at which entitlement arises. More on the cash itself in the tax-free lump sum.
The money purchase annual allowance has its own timing. Under PTM056520, where someone becomes entitled to a lifetime annuity and “the entitlement occurs on or after 6 April 2015, and the terms of the annuity contract allow actual, or possible, decreases in the amount of annuity payable other than in prescribed circumstances”, a trigger event occurs “immediately before the first payment of the annuity.” Whether a given contract allows decreases is a matter for its terms.
Waiting to buy is a separate option. MoneyHelper notes that part of a pot can stay invested while some or all of it later goes on an annuity, bought “at the same time or at a later date”. With drawdown in between, the value can fall as well as rise, and the later income is not fixed today. Because an annuity is hard to undo once bought (see the questions below), it is worth having the start date, any partner’s income and any guarantee checked against your whole position. Those timing questions are ones an FCA-authorised adviser can weigh with you; the short form here is how to request a call about them.
Which providers describe one
- Legal & General. Its “Compare annuities” guide, dated 7 October 2026, is the source of the description quoted above. The guide links each type to a product page where L&G offers it; the deferred entry carries no link and no price, so whether it will quote you one is a question for L&G.
- Prudential (M&G). Its Deferred Annuity pages, with a 2026 copyright line, sit in its section for existing customers and are addressed to people whose old scheme bought a policy for them.
- Rothesay and Nest. On 28 January 2026 Rothesay announced that Nest, the workplace pension scheme, had appointed it to co-design a “bulk deferred annuity”. Once the design is complete, Nest itself would be the buyer, purchasing these annuities from Rothesay for cohorts of its members, with longevity risk pooled. This is a deal between a scheme and an insurer, not a product an individual can buy, and the announcement gives no start age or price.
For the main annuity types see how a pension annuity works; a care-cost product with a delayed start is covered under care fees annuities.
What a deferred annuity rate can and cannot be
No dated deferred annuity rate from a UK provider appears here, because none of the documents above publishes one. A figure from a comparison site would be someone else’s claim about a price, not the insurer’s.
GOV.UK says an annuity’s amount depends on how long the insurer expects you to live and how many years it will have to pay you. For the usual drivers see how much income a pot buys, health and lifestyle and where rates are heading. GOV.UK also says you do not have to buy from your pension provider; comparing annuity quotes covers like-for-like comparison.
Deferred annuity questions people ask
What is a deferred joint life annuity?
It would combine a later start with an income that continues to a partner. Both the start and the continuation are set by the contract; M&G’s page says spouse benefits under its plans follow the original scheme rules. The partner’s side is in joint life annuities.
Can a deferred annuity be cancelled once bought?
Usually not, on MoneyHelper’s account: after purchase, and once any cooling-off period is over, you typically cannot change your mind. What is possible after that is covered in cashing in an annuity.
Is it the same as a fixed-term annuity?
No. MoneyHelper describes a fixed-term annuity as income for a fixed amount of time, such as five or ten years; a deferred annuity is about when the income starts. Savings can fund an annuity too: purchased life annuities.
Your next step
A deferred annuity is a decision about timing as much as income: when it starts, who it covers and what you give up. Pension Wise explains the options free. Your own case can be weighed by an FCA-authorised adviser, and the brief form on this page is the way to ask for that conversation.
Sources: HMRC, Pensions Tax Manual, deferred annuity contracts; PCLS applicable amount; becoming entitled; MPAA trigger events; deferred member; Prudential (M&G), Deferred Annuity and pension details FAQs; Legal & General, Compare annuities; Rothesay, partners with Nest; MoneyHelper, annuities explained (archived copy); GOV.UK, Personal pensions; GOV.UK, Changing jobs.