A guide to a secure income

A secure income is a financial product that allows you to convert your pension savings into a regular, fixed amount of money for the rest of your life. This is also called an 'annuity'.


Published  11 January 2022
   5 min read

What types of secure income are available? 

There are many different types of secure income available. Here's a quick summary of each one. 

Single life

Pays you a guaranteed regular income for the rest of your life. Income payments will stop when you die. 

Joint life 

Continues to pay some or all of the income you were receiving to your spouse or partner when you die. If you choose this option, it will reduce the starting level of your retirement income.  

Investment linked and with profits 

Your pension savings will be linked to the performance of investments such as stocks and shares. This means the income you receive could go up in line with future investment growth – but it could also go down.

You may also have to pay transactional charges (such as a fee for switching funds) or annual management charges.

How much income might I get?

How much income you get depends, in part, on the average length of time the provider expects to pay it out. The older you are when your secure income starts, the shorter that period is likely to be and so the bigger the income you could get.

Some providers look at your postcode. This is because life expectancy is shorter than average for people in some parts of the country and higher in others.

The amount of income you get also depends on investment conditions at the time you buy a secure income. When interest rates are low, secure income rates also tend to be low. 

What other features can I add on?

Guarantee your income for a set number of years

This gives you added security that, whatever happens,your income payments will be paid for a set period of time.

So, if you die during the guarantee period, your payments will continue to be paid to your dependant(s) at the same level for the remainder of your guarantee period. 

At the moment, the maximum guarantee period you can choose is up to ten years.

Enjoy a set level of income

While taking the same level of income will provide a higher starting income, the effects of inflation will reduce the amount you can buy over time.

Arrange for your income to increase each year 

This can help protect the buying power of your money as prices go up over time. 

As your income will increase over time, your starting income will be less than a level income. 

Options if your health is poor 

You could get a higher regular income if you have any health issues or habits that could shorten your life expectancy. This is called an ‘enhanced annuity’.

So if you're talking to a provider about buying a secure income, you should be open and honest about your health. You should also shop around to find the best deal.

Payment frequency and timing

You can choose how often you want your income to be paid –monthly, quarterly, every six months or even yearly.

You can also ask for your income to be paid as soon as possible (in advance) or at the end of your chosen payment frequency (in arrears).

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 take your savings to the market and see who’ll offer you the best deal.