How does a secure income work?

When you reach age 55, you can use your retirement savings to buy a secure income, also called an annuity. 

This will pay you a regular fixed sum of money that’s guaranteed to last for the rest of your life. 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. Before buying a secure income, you can usually take up to 25 per cent of your retirement savings as a tax-free lump sum.

Things to watch out for

With this option, you need to get things right first time. That’s because once things are up and running, you won’t be able to add extra features or cash in your plan. If you’d like to pass anything onto your loved ones, you’ll need to make sure it’s been agreed upfront, 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

Get up to speed 

If you’re planning to buy a secure income, there’s lots to think about. Select a question below to see how a secure income works and what it could mean for you and your pensions savings.

There are many types of secure income available – with lots of different features you can ‘bolt on’. These features are designed to offer extra peace of mind for you and your family after you retire. However, it's likely that any extra features you choose to add will reduce the starting level of your retirement income.

  • Take care of your loved ones

    You can pass on a portion of your pensions 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 pensions income to increase each year. This can help protect the buying power of your money as the cost of goods and services go up over time. 

  • Extend your income beyond death

    You can add a ‘guarantee period’ which means your income payments will continue to be paid for a set period of time - 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. This is called an 'enhanced annuity'.
  • Take some tax-free cash

    You can usually take up to a quarter of your pensions savings as a tax-free lump sum. You may be able to take more than this if you successfully applied to HM Revenue & Customs for a greater allowance.

    If you want to take tax-free cash, this has to be taken before you buy a secure income. Tax rules depend on your individual circumstances and may change in the future. 

  • Decide how often you want your money

    You can tell your provider how often you’d like your income to be paid. This could be anything from once a month to once a year.
  • You can’t change your mind

    Once you’ve used your pensions savings to buy a secure income, you can't usually change your mind - even if your circumstances do. So it’s really important you get things right first time. 

  • Adding extra features will lower your income

    If you want to add any extra features, such as making sure your loved ones will get some of your income when you die, you should expect to be paid a smaller income. 

  • Don’t lose out on any guarantees

    If your plan has a ‘guaranteed annuity rate’ it means your provider will guarantee to pay you a minimum level of income for the rest of your life, in return for your pensions 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 pensions savings could affect your entitlement to means-tested state benefits, this includes such things as housing benefits and council tax reductions.

Unless you've chosen to pass on some of your income to your loved ones or set a 'guarantee period', your pensions income payments will stop when you die.

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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.

How does this income option compare?

*You may be able to take more than 25% if you have protected tax-free cash. A financial adviser could help you understand whether this applies to you.
Your options Secure income Flexible access Take cash
Can provide 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 pot*  Usually up to 25% of your pension pot*  Usually up to 25% of your pension pot* 
Find out more   Flexible access  Take cash

Explore your options

Before deciding to buy a secure income, it's a good idea to take some time to fully understand all your options.

I'd like to learn more about buying a secure income

A secure income will provide you with a guaranteed regular income for the rest of your life. Simply tell us how you took out your pension plan - and we'll take things from there. 

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The good news is, there's plenty of support available.


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