- Do you want an income that will remain the same or increase each year?
- Do you want an income just for you or one that will go to your spouse or dependants if you pass away first?
- Do you want to benefit from stock-market performance?
- Do you want to buy an income for a shorter fixed term and then review your options?
- You could benefit from a higher income that takes into account any existing health issues you may have.
Guaranteed income for life
A lifelong, regular income (also known as an annuity) provides you with a guarantee that the income will last as long as you live. There are also short-term annuities available. A quarter (25%) of your pension pot can usually be taken tax-free and any other payments will be taxed as earned income.
Guaranteed income at a glance
Advantages
- You get peace of mind because you’re guaranteed the income you’ve arranged.
- You can make plans for the future knowing how much income you’ll have.
- It’s possible to provide an income to your spouse or partner or leave any surplus to your loved ones.
- Even if you live past 100, you could still have an income
- Your payments are protected by the Financial Services Compensation Scheme, so you’ll keep receiving them even if the company paying them runs into difficulties.
- You can combine guaranteed income with other types of retirement income.
Disadvantages
- Annuity rates are low at the moment, so you may not get as much income as you expect right now.
- It can take many years for the payments from an annuity to add up to more than the pot of money you had saved up in your pension pot.
- Providing an income to your spouse or partner or leaving any surplus to your loved ones may mean your income will be lower.
- Most annuities aren’t flexible. Once you’ve bought one, you have to stick with it – even if your situation changes.
- Unless you choose an increasing income the amount you receive will remain the same each year. With the effects of inflation, it will buy less as the years go by.
- Unless you choose an investment-linked income, you won’t benefit from economic or stock-market growth.
Finding the right guaranteed income
As there are many different types, it’s a good idea to shop around for the best deal. You’ll also have to consider what type is best for you.
Get an annuity quote
The MoneyHelper's Annuity comparison tool will help you to search the market to see how much income you could get from a guaranteed income for life (annuity), or a fixed term annuity.
Book your free PensionWise Guidance
This service offers free, impartial guidance to over 50s, to help you understand your options at retirement. You can access the guidance online at moneyhelper.org.uk or call them on 0800 011 3797.
The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment and eligibility to invest in a pension depend on personal circumstances. All tax rules may change in future.
This information is not a personal recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please refer to an authorised financial adviser.
The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age.