Pension Annuity

Our Pension Annuity is a lifetime annuity you can buy using the money from your pension pot. It will pay you an income for the rest of your life. In most cases, the earliest you can buy a pension annuity is age 55.


What are the options?

There are several options available so you can tailor your annuity to suit your needs. The options you choose will affect the level of income payable.

Option Details
Tax-free lump sum You can normally take up to 25% of your pension pot as a tax-free lump sum. If you don't take it at the start of your annuity, you won't be able to take it later.

You can be paid monthly or yearly, either:

  • In advance – at the start of the payment period; or
  • In arrears – at the end of the payment period.
Income options
  • Fixed income – take the same amount each year for the rest of your life.
  • Increasing income – increase your income by a fixed percentage each year for the rest of your life.
  • Inflation-proof – increase your income in line with the retail prices index (RPI) each year for the rest of your life.

The higher the level of increase you choose, the lower your starting level of income will be.

Dependant's income Pays your spouse, registered civil partner or financially dependent partner an income after you die.
Named partner

If you’re married or in a registered civil partnership, you can decide whether you want a pension income paid to your current partner ('named'), or paid to your partner at the time of your death ('any').

Choosing 'named' would give you a higher income than ‘any’ but if you choose 'named' and you re-marry, your partner at the time of your death (if different) will not be entitled to a dependant’s pension income.

If you’re not married or in a registered civil partnership when you buy your annuity and you want to provide benefits for your partner when you die, you must name them on your application.

Guaranteed Minimum Payment period

Your pension annuity payments will stop when you die, however you can add a guaranteed payment period to make sure your income continues to be paid for the chosen length of time.

You can choose a term of up to 30 years from the date the annuity starts, with a maximum age at the end of the period of 100. This means that if you're above age 70, the longest period you can choose will need to be lower than 30.

If you die during the Guaranteed Minimum Payment period, your income payments will continue to your estate or nominated beneficiaries at the same level. If you choose this option, your starting level of income will be lower. The longer the period you choose, the lower your income will be.

Value protection This option allows you to protect all or part of the amount used to buy your annuity. When you die, we’ll pay a lump sum for the amount protected, minus any income payments already made. You can protect 25%, 50%, 75% or 100% of the original amount used to buy your annuity.  You can’t combine value protection with any other death benefit.

Important things to consider

  • If you buy a pension annuity, you can't change your mind afterwards. The options you select when you buy the annuity can't be changed later on.
  • The annuity can't be cashed in or surrendered at any time.
  • Annuity payments are classed as income and are subject to income tax, and could affect any state benefits you claim.
  • Any tax you do pay on income from the plan will depend on your circumstances, and may change based on your income tax rate.
  • Depending on how long you live, you may receive less than you paid for your annuity.
  • If you have any medical conditions or lifestyle health risks, it's important to let us know when completing your application. You may be able to get an enhanced income.
  • It's important to ensure any medical and lifestyle information you give us is both accurate and complete so we can pay you the maximum level of income you're entitled to. We may request a report from your doctor after your income starts, to check any medical and lifestyle information you've given us. Your income may be adjusted if we find the report doesn't support what you've told us.

Ready to get a quote?

You can get a quote online for either of our retirement products.