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At a glance

If you choose to buy a regular income, known as an annuity, you’ll have:

  • A regular, secure income paid for the rest of your life by a provider outside the Plan.
  • Choice over the type of income you’ll receive, so you can match it to your personal circumstances.
  • Security for your dependants – the option to purchase a regular, secure income for your dependants if they outlive you.
  • Tax-free cash – the option to take up to 25% of your pension account as a tax-free cash lump sum at the point you retire.

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Does this option meet your needs?

We don’t regularly think about the financial implications of getting older, such as the possibility of needing care or how long you’ll live for. But as you approach later life and need to make a decision about your retirement income, it is important to think ahead.

Only you know your financial circumstances – for example, whether loans or mortgages still need to be paid off and the sort of needs you may have later on.

On average*, 65-year-olds in the UK live until they are:

Men: 84
Women: 86

*Office for National Statistics: National life tables - September 2018 (latest release)

Things to consider

Here are some things to help you consider which options will be right for you. The items in pink are the priorities which might mean you choose to purchase an annuity:

Income for life (annuity) options

What are your options if you buy a regular income for life (an annuity)?

Tax

Tax-free cash lump sum

  • You can usually take up to 25% of your pension account as tax-free cash.

  • The amount you could take depends on the value of your pension account and other retirement savings.

Income (subject to tax)

  • Your annual income will be taxed at the highest rate of income tax that applies to you for that year (20%, 40% or 45%).

  • As your annuity income is stable, you can expect to pay a similar level of tax each year (subject to any other income you have).

How do I buy an annuity?

An annuity will be provided by an insurance company, outside the Plan. Different annuity providers offer different rates for different types of annuity. So you may be able to secure a higher income, or an income that better suits your needs, by shopping around. This is often referred to as an ‘Open Market Option’. You can shop around yourself, or you can use an annuity comparison service, the Trustee have appointed HUB Financial Solutions to provide this service to members who want it. They will send you details of how they can help once you have requested a retirement quote from the pensions department.

Meet Jane

Jane has always put money aside each month for that ‘rainy day’. She’s worked hard for it and knowing that she has a little bit extra stashed away means she can treat herself now and again… Like the new patio she’s just had put in. After all, she’ll be spending a lot more time in the garden now she’s retired – hopefully without too many rainy days!

Jane chose to take the maximum tax-free cash lump sum, to top up her treat fund, and used what was left to buy an annuity. This will give her peace of mind and a regular income for the rest of her life.

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