Case studies
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Back to resultsPatricia
What Patricia wants
My husband looked after all our financial matters so I’d like to be sure that whatever happens going forward, I won’t run out of money. Receiving a guaranteed regular amount would make me sleep sound at night.
Patricia's idea
Buying a secure guaranteed income seems to be the best way to know that I won’t spend my pension pot too quickly.
What Patricia does
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Patricia takes one quarter of her pension pot as a tax-free lump sum of £12,500 and uses the other £37,500 to purchase a lifetime annuity
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This annuity will continue to pay the same level of guaranteed income for the rest of her life
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Patricia receives an annual income of £1,875. As she pays basic rate tax, she will pay £375 a year tax on this income
What Patricia gets
See how we worked this out
- State Pension age63
- State Pension£8,546
- Pension pot£50,000
- Other income£30,000 a year
- Other savingsNone
- Property value£340,000
Patricia's calculation
Personal allowance (0% tax) | Earnings from £0 to £11,850 |
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Basic rate (20% tax) | Earnings from £11,851 to £46,350 |
State Pension | £8,546 a year |
Final salary pension | £30,000 a year |
Total regular income (subject to tax) | £38,546 a year |
Remaining basic rate tax band | £7,804 |
Lifetime annuity (taxed at 20%) | £1,775 a year |
Important things to consider
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Patricia has chosen a fixed income from her lifetime annuity, which won’t increase in value. As a result, the effect of inflation will reduce the buying power of the income over time
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Better deals may be available so it’s important to shop around
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If Patricia lives beyond 20 years of taking out the lifetime annuity, she will receive more money than her pot was originally worth
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If Patricia had any medical conditions or lifestyle health risks she could have received a higher income
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If Patricia dies early, she may not receive the full value of her pot
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Tax payable on the income will be taken off before it is paid out
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Buying a lifetime annuity is a once and for all decision. Once an annuity is set up and the cancellation period had expired, it can't be changed
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This example is based on current law and tax rates. These may change in the future and income tax will depend on individual circumstances
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The income tax rates and bands for Scottish residents may be different
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The State Pension amount shown here is the current maximum and is only an example. The amount you get depends on your National Insurance contributions’ record and your individual circumstances. You can get a State Pension forecast by visiting View - Check your State Pension