Retirement Routes 1: Guaranteed income (annuity)

Guaranteed Income (annuity)

Watch an overview

If you’re watching the video on your phone, you might need to hold it horizontally.

Read more detail
Read time: 4 minutes

A guaranteed income pays you a pension for the rest of your life (or a set length of time). To get this income, you use your pension pot to buy a product called an annuity.

Annuities are looking like a more attractive route

After falling out of favour for some years, annuities are looking like a more attractive direction to go in. There are a few possible reasons for this.

1. Better value as interest rates rise

Annuities used to look like poor value. You didn’t get much yearly income in return for the money in your pension pot. 

But annuity rates are now at their highest level in more than a decade.

A person aged 65 with £100,000 in pension savings could now get an annuity income of £6,873 a year. At the beginning of 2022, you would have received around £4,521.

If you’ve been considering how best to take your retirement benefits, it may be worth looking at an annuity again.

💡 The Pension Potential annuity finder takes the hassle out of shopping around for an annuity yourself and, well, it finds an annuity just for you. You’ll get access to the latest quotes from all providers within the annuity marketplace.

2. Passing on benefits

Some people have been put off annuities in the past because the income stops when you die. But there are ways to pass on the benefits.

• You can buy an annuity that pays a pension to someone close to you, if you die before them.
• You can choose a guarantee period so the income payments will continue for a fixed time – even if you die during that time.
• There’s also value protection, where you protect part or all of the cost of your annuity for your beneficiaries. After you die, your provider takes off the amount you’ve received and pays anything left over to your beneficiaries.

Doing any of these things will make your own income smaller – but it may be worth it.💡 The Pension Potential annuity finder can show you annuities with pensions for someone close to you, guarantee periods and value protection – so you can compare how much you’d get with each option.

3. Security

Many people are realising it might be valuable to have a guaranteed income that pays out for the rest of your life, and isn’t affected by changes in the stock market (although the right option for you still depends on your personal circumstances).

And you can help protect your income from the effects of inflation by choosing an annuity with increases. This does make your starting income smaller but the increases, like the income, are guaranteed for the rest of your life. 

💡 You can play with the potential of your annuity and personalise your quotes even further with the Pension Potential annuity finder. You may want to change how much tax-free cash you’d like to take or use different pot values or increases. You’ll get the latest quotes so you can see the difference to your income.

What Pension Potential can do for you

Pension Potential is designed to help you explore how different types of annuities could work for you – all in one place.

✔️ First, fill in the form on the Pension Potential hub to get some quotes that’ll give you a good idea of how much an annuity could pay. Then, choose ‘Shop for a guaranteed income’ to use the Pension Potential annuity finder to get more accurate quotes.

✔️ It’s worth taking the time to put in as much detail as possible – including medical information – because it can give you higher quotes. We’ve created an annuity finder checklist to help you make sure you’ve got all the information you’ll need.    

✔️ Using the annuity finder doesn’t oblige you to do anything. It does the hard work for you so you can see all your quotes, from the whole of the annuity market, in one place.

✔️ And if you do want to buy an annuity, you can do it there and then. You’ve also got the option of talking to a friendly retirement expert to help you. They’ll check your annuity quote and help you buy it too.