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Buy a secure income

Buy a guaranteed regular income for the rest of your life. This is also known as an ‘annuity'.

 Video transcript

At the moment, from age 55, you can turn your pension savings into a regular income that’ll keep going for as long as you do. This is also called ‘buying an annuity’. This is increasing to age 57 from the 6th of April 2028.

You give some or all of your pension savings to an insurance company and, in return, they'll pay you a guaranteed, regular income every year for the rest of your life. You can also combine taking a secure income with your other retirement options.

You can choose to add extra features such as yearly increases to your money or making sure your loved ones will get some of your income when you die. It costs more to add on certain features, so your starting level of income will be less.

Before buying a secure income, you can usually take up to 25% of your pension savings as a tax-free lump sum.

Things to watch out for:

With this option you need to get things right the first time.

That's because once things are up and running, you won't be able to add extra features or change your mind – even if your circumstances do.

If you'd like to pass anything onto your loved ones, you'll need to make sure it's been agreed up front otherwise your income will usually stop when you die.

Before buying a secure income, you should shop around to find the best deal, it might just give you more money in your pocket.

To find out more about your retirement options, talk to your financial adviser, or visit royallondon.com/retirement

 What features can I add to my secure income?

There are lots of different features you can add to your secure income, designed to offer extra peace of mind for you and your family.

Take care of your loved ones You can pass a portion of your retirement income to your spouse, civil partner or other dependant(s) should they live longer than you do.
Keep pace with inflation You can arrange for your retirement income to increase each year. This can help protect the buying power of your money as prices go up over time.
Guarantee your income for a set number of years You can add a ‘guarantee period’ which means your income payments will continue to be paid to a set age – even if you die before then.
Have a lump sum paid on your death You can arrange for a lump sum to be paid to your loved ones on your death, should you die before them.
Get a bigger income if you’re in poor health You may be offered a higher level of income if you have any health issues or habits which could shorten your life expectancy.
  • Take care of your loved ones
    You can pass a portion of your pension income to your spouse, civil partner or other dependant(s) should they live longer than you do.
  • Keep pace with inflation
    You can arrange for your pension income to increase each year. This can help protect the buying power of your money as prices go up over time.
  • Guarantee your income for a set number of years
    You can add a ‘guarantee period’ which means your income payments will continue to be paid to a set age – even if you die before then.
  • Have a lump sum paid on your death
    You can arrange for a lump sum to be paid to your loved ones on your death, should you die before them.

You should be aware it costs more to add on certain features. This means your starting level of income will be less.

 What else should I think about?

  • Choose how often you want to be paid
    You can tell your provider how often you’d like your income to be paid. This could range from once a month to once a year.
  • Tax-free cash
    You can usually take up to a quarter of the value of your pension savings tax-free. If you want to take tax-free cash, it has to be taken before buying a secure income. If you were entitled to more than a quarter of the value tax-free as at 6 April 2006 you can keep this entitlement, but only if you take all your pension savings at the same time.
  • Get a bigger income depending on your health or lifestyle choices
    You may be offered a higher level of income if you have any health issues or lifestyle choices which could shorten your life expectancy. This is called an 'enhanced annuity'. So if you're talking to a provider about buying a secure income, be open and honest about your health. You should also shop around to find the best deal.

 What do I need to watch out for?

  • You can’t change your mind
    Once you’ve used your pension savings to buy a secure income, you’re locked in. That means you can’t make any changes – so it’s really important you get things right first time.
  • Don’t lose out on any guarantees
    If your plan has a ‘guaranteed annuity rate’ it means your provider will normally be able to offer you a higher level on income than you would get elsewhere for the rest of your life, in return for your pension savings. This is a rare and potentially valuable feature, so it’s worth checking whether this applies to you.
  • Your entitlement to state benefits could be affected
    The amount of income and/or tax-free cash you take from your pension savings could affect your entitlement to means-tested state benefits. This includes things such as housing benefits and council tax reductions

 What happens when I die?

Unless you choose to pass something on to your loved ones, your pension income payments will stop when you die.

 Remember - you can shop around

When you come to buy a secure income, you’re free to shop around. That means you don’t need to stay with the pension provider you’ve been saving with – you can see who can best meet your needs.

 How does this income option compare?

Your options Secure income Flexible access Take cash
Can I arrange to take a regular income? Yes Yes No
Is my income guaranteed for the rest of my life? Yes No No
Can I change how much money I receive? No Yes Yes
Could my money run out later in retirement? No Yes Yes
Can I do something different with my savings in later years? No Yes Yes
Can I take some tax-free cash? Usually up to 25% of your pension savings* Usually up to 25% of your pension savings* Usually up to 25% of your pension savings*
Find out more  

Flexible access

Take cash

 What other options do I have?

Take a look at the other options you have available.

Keep us up-to-date

Keep us up-to-date with any changes that could affect your retirement plans.

If you decide to change your retirement age, let us know. If you're invested in a Lifestyle Strategy, we'll make sure your money is invested in the right part of the strategy.

Did you know?

If you die before you take any or all of your pension savings, your savings could be paid to one or more beneficiaries of your choice. If you've not chosen beneficiaries or would like to change your beneficiary details you can complete the form online or download and print a paper form.

Know your limits

The government has set limits to do with pension contributions and taking your pension savings.

Find out more

Remember

Tax rules depend on individual circumstances and could change.

Contact us

Email us

0370 850 1991