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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.

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. See the Retirement Living Standards which show you what life in retirement looks like at three different levels of income.

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 using MoneyHelper’s annuity comparison tool to search the market. The Trustee has also appointed HUB Financial Solutions to provide this service to members who want it, or you can use another annuity broking service. They will send you details of how they can help once you have requested a retirement quote from the pensions department.

Jane's Choice

What was important to Jane was a regular income each month, similar to the Plan pension, but tailored to better suit her circumstances. Jane took financial advice and was recommended to buy an annuity from an insurance company.

Your State Pension