Take a guaranteed income

Get tax-free cash and a secure income for life.

How it works

You can take up to 25% of your pension as tax-free cash then use the rest to buy a guaranteed income for the rest of your life. This is also called an ‘annuity’. Once the income starts, you can’t make any changes to it. The income you get depends on your age, lifestyle, and the annuity rates available at the time.

Benefits

  • Dependable income
    You’ll continue to be paid for the rest of your life.
  • No investment risk
    There’s no investment involved, so you won’t lose money as you age.
  • Personalised income
    You can tailor your guaranteed income to suit you.

Limitations

  • Can’t change your income
    If your life becomes more expensive, you may not have enough.
  • Might not keep up with inflation
    Your income might not keep up with inflation, unless you choose certain options for your annuity.
  • No payments after death
    Unless you add protections, your annuity income can’t be passed on to loved ones.

Is it right for you?

This option is good for people who:

  • Want to know how much income they’ll receive each year.
  • Value security and want an income for life.
  • Want to take their tax-free cash before setting up a guaranteed regular income.

They might also be the type of person who:

  • Doesn’t plan to take tax-free cash and would prefer to put that money towards a guaranteed income.
  • Wants to personalise their income with optional features, like spousal benefit or inflation adjustments.

Things to think about:

  • If you choose not to link your annuity with inflation, your money won’t go as far in the future.
  • Some pensions have guarantees that apply when you take money at certain times.
  • If you retire earlier or later than your provider expects, these guarantees could change the amount you receive.

What else should you know?

How your pension is taxed

You can take up to 25% of your pension tax-free, then use the rest to set up your guaranteed income. These income payments will be taxable, so there might be tax to pay.

If you take tax-free cash, you can’t add it back later to boost your annuity payments.

The maximum tax-free amount you can take across all your pensions is £268,275. This is called the Lump Sum Allowance. 

Your tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future. If you're unsure, please get in touch with HMRC or a tax adviser.

Future pension contributions

Once you set up a guaranteed income, you can't make contributions to it.

If you use part of your pension to buy a guaranteed income, then you can still contribute to part that's left over.

If you have other pensions, you can contribute to them as normal, until age 75. 

What happens when you die

The income payments will usually stop after you die. But there are options that could help your loved ones when that time comes. These include:

- Dependant’s annuity
- Guaranteed payment period
- Value protection

A financial adviser can help you understand these options. 

Explore other pension options

Access your money flexibly

Get 25% tax-free cash and keep the rest invested to use as an income.

Explore flexible access

Take some of it as a lump sum

Receive a taxable sum where 25% is tax-free.

Explore taking some

Take all of it at once

Withdraw your full value, 25% tax-free.

Explore taking it all

Leave it for now

Continue to save and make a decision later.

Explore leaving it