Thinking of converting your pension into a guaranteed income for life? Enter your pot, take your tax-free cash, and see the annual annuity income it could buy — level or rising with inflation.
Guaranteed income for life
An annuity swaps your pension pot for a guaranteed income for the rest of your life. You hand the pot to an insurer, and in return they pay you a fixed (or rising) amount every year, no matter how long you live. It removes investment risk and the worry of running out of money — but once bought, it usually can't be reversed.
| Choice | Effect on income |
|---|---|
| Level income | Highest start, falls in real terms |
| Inflation-linked | Lower start, keeps buying power |
| Joint life | Lower, pays a spouse after death |
| Enhanced (ill health) | Higher rate for medical conditions |
The alternative to an annuity is pension drawdown, where you keep the pot invested and draw an income flexibly. Annuities give certainty; drawdown gives flexibility and the chance of growth, at the risk of running out. Build your overall pot first on the pension calculator and check your State Pension on top.
At a ~6–7% rate for a healthy 65-year-old, roughly £6,000–£7,000 a year of level income for life. Taking 25% tax-free cash first reduces it proportionately.
The annual income as a percentage of the pot. It rises with age and ill health, and falls for inflation-linking or a spouse's pension.
Yes — usually up to 25% tax-free, then annuitise the rest. The annuity income is taxable.
Yes, as ordinary income through PAYE, on top of any State Pension and other income.
