A literary science fiction novel set in the near future in which an old woman, close to death, contemplates her life, has won this year's Arthur C Clarke award for science fiction.

Ian R MacLeod's Song of Time takes place near the end of the 21st century, as an aged concert violinist, about to pass into a virtual afterlife, discovers a half-drowned man on a Cornish beach. Described by the Guardian as "a slow, sensitive first-person account of what it means to be human and vulnerable", and as a book which "confirms MacLeod as one of the country's very best literary SF writers", the book was last night chosen ahead of more classic science fiction fare, from former winner Paul McAuley's interplanetary space battle The Quiet War, to Alastair Reynolds's hard SF space opera House of Suns and Sherri S Tepper's tale of a human child enslaved by aliens, The Margarets.

Anathem, Neal Stephenson's story of a religious order on a far-future, Earth-like planet, was also shortlisted, alongside Mark Wernham's debut, Martin Martin's On the Other Side.

"This was a very strong shortlist and it was a particularly intense and long shortlist meeting this year," said chair of the judges Paul Billinger. The final decision was "a very close run thing" for the panel of judges, drawn from the Science Fiction Foundation, the British Science Fiction Association and the website SF Crowsnest, said Billinger. "What swung it in the end [for Song of Time] was the emotion, the feeling from it – and the characterisation." MacLeod wins £2,009, and a commemorative engraved bookend.

"The variety and scope across this year's submissions list shows just how complex it is to even neatly define what constitutes the best of modern science fiction," said Tom Hunter, award administrator. "People used to talk in terms of the SF community versus the mainstream, and how one day the geeks would inherit the Earth. I don't think that's going to happen, but maybe something more interesting is, and this is where things like the Clarke award can be a useful barometer for the broader culture."

MacLeod himself, in an interview with SF Crowsnest, disputed the categorisation of science fiction. "Categories are for wimps and publishers. They're things that real writers should challenge rather than accept," he told fellow author Stephen Hunt. "I used to think when I first reached adulthood in the 70s and realised I really did want to be a writer that SF would become something bigger and broader than what it then was. That writers like Ballard and Silverberg on the genre side and Fowles and Golding on the mainstream side were already producing stuff which would make the old distinctions irrelevant. That hasn't happened. Or at least not yet. Fact is, SF got more ghettoised rather than less. But there do seem to be encouraging signs that the broader genre of fantastic fiction which I believe I work in is getting both more edgy and finding greater of mass appeal."

Last year's award was won by Richard Morgan for Black Man. Margaret Atwood won the inaugural prize in 1987 for The Handmaid's Tale, and other previous winners include China Miéville, Geoff Ryman and Amitav Ghosh.