Case studies

Here are your results based on these filters.

  • Defined contribution pension pot of
  • Other retirement income of
  • Savings (excluding pensions) of
  • Examples of
Back to results

Adam

I want to be secure in my old age.

Adam is aged 66, divorced and has two grown up children. He has a defined contribution pension pot of £325,000, receives his full State Pension and has savings of £150,000.

Adam

What Adam wants

My parents are both in their early nineties and although slowing down, still enjoy reasonably good health. Other than my savings and State Pension, I have no other income and I don’t want to get to my parents’ age and find that I have run out of money.


Adam's idea

Buying a guaranteed income seems the sensible thing to do. I’ve taken risks in the past when I ran my business but now I’m retired, I want to enjoy a secure income and not have to worry.


What Adam does

  1. Adam takes one quarter of his pension pot as a tax-free lump sum of £81,250

  2. He uses the other £243,750 to purchase a single life lifetime annuity which will continue to pay the same level of guaranteed income for the rest of his life

  3. Adam receives an annual income of £12,450 less tax. Some of this will not be taxable as he still has £3,304 of his personal allowance. The balance is taxed at basic rate so he will pay £1,829.20 a year tax on this income (assuming no further income is generated from his savings which would also be taxable)


What Adam gets

Tax-free cash £81,250
Lifetime annuity £12,450 a year, subject to tax

See how we worked this out

  • State Pension age65
  • State Pension£8,546
  • Pension pot£325,000
  • Other incomeNone
  • Other savings£150,000
  • Property value£440,000

Adam's calculation

Personal allowance (0% tax) Earnings from £0 to £11,850
Basic rate (20% tax) Earnings from £11,851 to £46,350
State Pension £8,546 a year
Remaining personal allowance £3,304

Lifetime annuity

  • Amount taxed at 0%
  • Amount taxed at 20%

£12,450 a year

£3,304
£9,146


Important things to consider

  • Adam has chosen a fixed income from his 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

  • Better deals may be available so it's important to shop around

  • If Adam lives beyond 19 and a half years of taking out the lifetime annuity, he will receive more money than his pot was originally worth

  • If Adam had any medical conditions or lifestyle health risks he could have received a higher income

  • If Adam dies early, he may not receive the full value of his pot

  • As Adam will enter into the basic rate tax band, he will pay income tax on part of the annuity income and this will be taken off before it is paid out

  • Buying a lifetime annuity is a once and for all decision. Once an annuity is set up and the cancellation period has expired, it can't be changed

  • This example is based on current law and tax rates. These may change in the future and income tax will depend on individual circumstances

  • The income tax rates and bands for Scottish residents may be different

  • 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 

Back to results