Lifetime Annuity

What Is A Lifetime Annuity?

What is Lifetime Annuity?

A lifetime annuity is an investment fund which allows you to exchange a percentage of your pension for a guaranteed income for life. You can also add your partner, which is known as a joint life survivor annuity.

Previously it has been compulsory to purchase a lifetime annuity with the proceeds of a defined contribution pension, however since 2006, this is no longer the case. There are a wide range of annuities available and you should be certain that a lifetime annuity is the right option for you, given that it is usually unchangeable.

How does a Lifetime Annuity work?

A lifetime income annuity is usually bought with the remainder of your pension balance, once you’ve taken any allowed tax free lump sum payments. The income from your annuity will be given as regular payments and taxed, much like a salary.

Your annuity rate (income from the annuity) will ordinarily be higher, the later in life you begin it, as the rate is based upon average life expectancy. You have two income options:

Basic lifetime annuities

This is where you choose a set regular income amount which remains the same for the rest of your life.

Investment-linked annuities

This is where your annuity rate is based on the performance of investments. This means that your payments will fluctuate, but will never fall below a guaranteed minimum amount.

Things to think about before taking out a Lifetime Annuity

There are a range of things to consider when taking out a lifetime annuity, such as:

  • Whether you want to take out a single or joint lifetime annuity. A joint lifetime annuity can pay a surviving partner after you die
  • Whether you want to allocate beneficiaries. Payments can be made to a beneficiary for a guaranteed period of time after your death, if you die earlier than expected. You can also opt for value protection, which pays a beneficiary the remainder of your annuity value, minus the payments you received during your lifetime
  • If you’re in poor health, you may be able to receive higher annuity payments, known as enhanced annuities or impaired life annuities. If you have a very short life expectancy, however, an annuity may not be the best option
  • You should seek qualified pensions advice prior to making any decisions as lifetime annuities are permanent. You are unable to leave or change it, once you buy an annuity
  • Ensure that you shop around, as it’s often possible to find a more attractive deal. The Financial Conduct Authority reported that 8/10 retirees could get a better offer than their current provider is able to offer.

What happens when you die?

With a single life annuity, if you die after the age of seventy-five, then your pension will cease. If you die before that, however, your beneficiary will either receive the remainder of the annuity value tax free or in the case of a joint lifetime annuity, your surviving partner will receive their annuity payments tax free for the rest of their life.

What are the other retirement income options available

If you decide that buying a lifetime annuity is not right for you, there are a range of other retirement income options to consider. Since 2015 there have been many more options available to those drawing a pension. It’s important to take the time to fully understand your options and ensure you make the right decision for you.

  • Before committing to your desired pension options, you should consider the following options, which can be used in isolation or combined with other options:
  • Delay taking your pension, allowing your pension value to continue growing, tax-free
  • Take a flexible retirement drawdown, which you then invest in order to provide you with a regular taxable income. This is less secure than a lifetime annuity as it’s not guaranteed for life
  • You can take a series of cash payments from your pension pot, however, there are often charges on each withdrawal
  • You can choose to close the pension fund and take the entire investment as cash. You will only usually receive 25% of this amount tax-free and the remaining 75% is taxable

How can CS Retirement Solutions help?

Choosing the right options for your retirement can be daunting and in some cases, complex.
It’s important that you obtain impartial advice from an authorised pensions advisor prior to making any lifelong decisions.

At CS Retirement Solutions we can base our qualified pensions advice on your personal circumstances to ensure that your retirement planning is optimal for you.


Raising The standards of financial advice


Making financial advice accessible to all


Trusted & stress-free financial advice


Friendly, personable advisors

Borrowing options in your later years
Borrowing options in your later years
The Brexit Debate
The Brexit Debate
How will changing working patterns affect your pension
How will changing working patterns affect your pension
Take Control of Your Investments
Take Control of Your Investments
Reviewing your pension contributions
Reviewing your pension contributions
previous arrow
next arrow

Contact Us

We care passionately about making financial advice accessible to all, in an easy to understand and friendly manner. We aspire to raise standards in all areas of financial advice and hope to challenge any negative industry perception by offering a genuine and trustworthy service.

1 Step 1
FormCraft - WordPress form builder