At the moment, from age 55, you can turn your pension savings into a regular income that’ll keep going for as long as you do. This is also called ‘buying an annuity’. This is increasing to age 57 from the 6th of April 2028.
You give some or all of your pension savings to an insurance company and, in return, they'll pay you a guaranteed, regular income every year for the rest of your life. You can also combine taking a secure income with your other retirement options.
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. It costs more to add on certain features, so your starting level of income will be less.
Before buying a secure income, you can usually take up to 25% of your pension savings as a tax-free lump sum.
Things to watch out for:
With this option you need to get things right the first time.
That's because once things are up and running, you won't be able to add extra features or change your mind – even if your circumstances do.
If you'd like to pass anything onto your loved ones, you'll need to make sure it's been agreed up front 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 royallondon.com/retirement
What is a pension annuity?
Our secure income product - also called annuity - can help turn your pension savings into a regular income that'll keep going as long as you do. The amount you receive will depend on the money you’ve saved, your age and health when you retire and any extra features you might add.
You can find more about buying an annuity, and your other options in our retirement guide.
How can I buy an annuity?
With our annuity bureau, you can choose from a selection of annuity providers.
You don't need to buy a secure income from us, so by doing a little homework, you might get more money in your pocket.
Take tax-free cash
You can choose to take a cash lump sum and use the rest of your pension savings to buy a secure income.
Decide when you'd like your regular income to be paid, perhaps every month, or just once a year.
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 buying an annuity 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 in line with inflation. 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 an 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 need to think about how often you'd like your money to be paid. Many providers will allow you to choose monthly or yearly payments, with some offering quarterly payments as an option.
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.
Not ready to access your pension savings?
That's ok, you can leave your money invested. By continuing to invest over a longer period of time it gives you more time to ride out the ups and downs of the market. But remember, those investments can go down as well as up and you may not get back what you put in.
If you're aged 55 or over (57 from 6 April, 2028), you can access your pension savings whenever you feel the time is right. You can buy an annuity, dip in with pension drawdown or take it all as a cash lump sum.
What is an annuity?
If you’re thinking about buying an annuity to provide you with income in your retirement, it’s important to know the basics.
Find the support you need
Find a financial adviser
Pension Wise (external site) is a government service from MoneyHelper that offers free, impartial pensions guidance.
Tell us how much income you're looking for when you retire, give us a few personal details and we'll let you know if you're on track.
Our mobile app makes it easy to check in with your pension savings whenever you like, and as often as you like.
Your plan online
Depending on the type of pension plan you have, you can access details of your pension savings with our secure online service.