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.
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.
If you would like to take an income for life, you can tailor your income to suit your circumstances.
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
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.
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.
There are a number of scenarios here, depending on your choices at the time you set up your income for life.
|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.
Tap the options below for an overview of available options to you.