How does a secure income work?
Secure income video transcript
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 www.royallondon.com/retirement.
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.
What features can I add to my secure income?
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'.
What else can I do with a secure income?
- 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.
What do I need to watch out for?
- 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.
What happens when I die?
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.

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?
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 |
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.
To find out more about buying a secure income, give our customer service team a ring.
You'll find our contact details on the latest communication we've sent to you. Otherwise, you can give us a ring on 0345 60 50 050 (Mon-Fri, 8am – 6pm).
To find out more about buying a secure income, give our customer service team a ring on 0345 050 20 20 (Mon-Fri, 8am – 6pm).
We've bought, owned and rebranded a number of specialist businesses, so if you’re trying to track down a plan from one of these companies - or you have an inkling your plan might be with us - we’re here to help.
Find the support you need
You've got some big decisions ahead - and no doubt you'll have some questions.
The good news is, there's plenty of support available.