Use your pension pot to get a guaranteed income for life

What is a guaranteed income for life?

A guaranteed income for life is an insurance policy that guarantees to pay you a regular income for the rest of your life. It is sometimes referred to as an annuity.

You can generally choose to receive your income monthly, quarterly, half-yearly or yearly. There are a number of different options for tailoring your income for life to suit your personal circumstances, and further information about these is given below.

Taking a tax free lump sum

When you use your pension policy to buy an income for life, you have the option to take a tax free lump sum. You are normally entitled to take up to a quarter (25%) of the money in your pension policy in this way, but if you choose this option, there will be less available to buy your income for life. This is because the amount available to buy your income for life will be reduced by the amount you take as a tax free lump sum.

How your payments will be taxed

The income you receive is generally taxable, in the same way that tax is paid on your income. The amount of Income Tax you pay each year depends on your total income. The pension provider that pays your income for life is required to deduct tax from your income before you receive it, using your personal tax code specified by HMRC.

The range of income options

If you would like to take an income for life, you can tailor your income to suit your circumstances.

Joint or single life income - your income is guaranteed to be paid until you die, but you can choose to have the income, or part of it, continue to your surviving spouse, civil partner, or a dependant after your death (known as a joint life income for life). If you choose joint life, the amount of income you receive will be lower than if you choose to have your income paid only throughout your lifetime (the single life income for life). However, if you choose single life, and your spouse, civil partner or dependant outlives you, they will not receive any income after your death (although they may do for a limited period if you choose a guaranteed period - see below).
Guaranteed period – you can choose to have payments continue for a selected minimum number of years from when your income for life starts, even if you die within that period. If you choose this option, you will receive a slightly lower income than if you do not choose it, but if you don’t choose it and you die unexpectedly early, then the income payments would cease immediately (unless you have chosen to receive a joint life income for life – see above).
Level or increasing income for life - you can choose between income payments that remain level throughout your lifetime, and income payments that start lower, but increase each year. Payments that increase each year, will help reduce the effects of inflation on the value of your income. There are a number of increase options to choose from. If you choose a level income, over time you will find that price inflation means that your income will buy you less.

Shopping around

There are a number of companies offering guaranteed income for life products, and some may offer a higher income than Utmost Life and Pensions can offer. In view of this, we strongly recommend that, you shop around to find the best deal. You can compare basic guaranteed income for life products using the Money Advice Service Annuity comparison table at

https://www.moneyadviceservice.org.uk/en/articles/what--is-an-annuity

Taking a tax free lump sum

Your health and lifestyle could affect the amount you can receive as an income for life. If you smoke, or have a medical condition, you may be eligible for ‘enhanced terms’ for your income for life. Enhanced terms tend to mean a higher income, because the income is expected to pay out over a shorter time. If you might qualify for enhanced terms, it is even more important for you to shop around to obtain the best deal.

State Benefits

Both the income for life you will receive and the tax free lump sum (if you choose to take it) could affect your entitlement to State benefits, now or in later life. If you are currently receiving state benefits and/or you expect to receive them in the future, you should check whether there may be a reduction in your entitlement to them by choosing to receive your income for life (and any tax free lump sum). There is more information about how income or a lump sum can affect your State benefits at GOV.UK.

What happens to your income when you die?

There are a number of scenarios here, depending on your choices at the time you set up your income for life.

Scroll to explore this table's contents.

Joint or single life income for life	Did you choose a guaranteed period?	What happens to the income when you die?
Single life	Yes and you die before the period has ended	Your income for life will continue until the end of the period you chose
Single life	Yes but you die after the period has ended	Your income for life will stop when you die
Single life	No	Your income for life will stop when you die
Joint life	Yes and you die before the period has ended	Your income for life will continue until the end of the period you chose. The proportion of your income you chose for your surviving spouse, civil partner, or dependant will be paid for the rest of their life
Joint life	Yes but you die after the period has ended	The proportion of your income you chose will be paid to your surviving spouse, civil partner, or dependant for the rest of their life
Joint life	No	The proportion of your income you chose will be paid to your surviving spouse, civil partner, or dependant for the rest of their life

If you die before age 75, and you chose a joint life income for life, then the income paid to your surviving spouse, civil partner or dependant will be tax-free. Similarly, if you chose a guaranteed period, and die before age 75 and during the guaranteed period, the payments until the end of the period will be tax-free.

If you die at or after age 75, any person receiving payments after your death will have to pay Income Tax.

Please read about Pension Scams and Pensions Advice.

Request your Pensions Option Pack

For information on accessing your pension pot, request your personal Pension Options Pack.

Find out about your other options.

Tap the options below for an overview of available options to you.

Keep your pension savings where they are

You can delay taking money from your pension pot to allow you to consider your options. Reaching age 55 or the age you agreed with us is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

Your policy can be extended to a maximum age of 75. You will need to choose one of the other options by the time you reach 75.

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Use your pension pot to get a guaranteed income for life

A lifelong, regular income provides you with a guarantee that the income will last as long as you live. A quarter of your pension pot can usually be taken tax-free and your income payments will be taxable.

You use your pot to buy an insurance policy called an annuity that guarantees you an income for the rest of your life – no matter how long you live. If you want to take an income for life, you should shop around for the best deal. If you want to take an income for life with us you must do so by age 75

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Use your pension pot to provide a flexible retirement income

You can move your money to another pension pot and take an income from it. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too.

A quarter of your pension pot can usually be taken tax-free and any other withdrawals will be taxable whether you take them as income or as lump sums.

You will need to transfer to a different pension provider to do this.

You do not need to take a regular income.

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Take your pension pot as a number of lump sums

You can move your money to another pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter of it is tax-free and the rest will be taxable.

You will need to transfer to a different pension provider to do this.

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Take your pension pot in one go

You can take the whole amount as a single lump sum. A quarter of your pension pot can usually be taken tax-free – the rest will be taxable. You will need to plan how you will provide an income for the rest of your retirement.

You can choose this option for one or more policies individually.

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Mix your options

You can also choose to take your pension benefits using a combination of some or all of the options over time. If you have more than one policy, you can use a different option for each policy.

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