One of the retirement options available to you is to use your pension savings to create a regular guaranteed income.

Buying an annuity with your pension

You can use some or all of your pension savings to buy an annuity, a plan that provides a guaranteed income for either a fixed term or for the rest of your life. You can relax in the comfort of knowing you will always have an income to rely on, but you’ll need to be sure about your decision because you cannot encash an annuity for a lump sum once it’s arranged.

Other options that you have with regard to your pension include:

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Applies to all our plans

More about your options

Get a better understanding of your options by watching this video about your retirement choices:

Buying an annuity – why might you choose this?

The earliest you can access your pension savings is when you reach your 55th birthday, an age set by the government. Creative Pension Trust gives you freedom and flexibility in choosing how to draw your pension. If an annuity is right for you, you can transfer some or all of your pension savings to an annuity provider.

Although buying an annuity may not be right for everyone, there are many reasons why choosing a guaranteed income may be right for you. For example, you may:

  • prefer the security of a guaranteed income so you don’t run out of money in retirement
  • not have other sources of retirement income or savings to fall back on
  • not want to continue making financial decisions that affect your income in later life

It is important to remember that, on average, someone who is aged 55 today will likely live into their mid-to-late 80’s. This means your pension will likely need to last you a long time. An annuity can provide an income until you die, but it may not be flexible enough for some people.

What happens to your pension savings?

If you use all of your pension savings to purchase an annuity, we will normally close your account. Because you are giving your savings to an annuity provider in return for a guaranteed income, you will no longer have access to your savings as a lump sum.

If you only use some of your pension savings to purchase an annuity, the remainder stays invested in your Creative Pension Trust account until you make any further decisions and you retain full flexibility over what you do with it.

Will you need to review your arrangements?

No, buying an annuity is an irreversible decision and you will agree to the basis of the annuity before it begins. Once it starts, it cannot be encashed. Read the sections below for more information about features you will need to choose before your annuity starts and other considerations you should be aware of before you make any decisions.

Are there other flexibilities?

There are many different choices, including fixed-term and lifetime annuities, fixed payment or inflation-linked, and options to continue paying an income to your dependants when you die.

You should take time to explore these options and consider which would be appropriate to your needs. Generally, the more features you choose, the lower the starting income will be.

As this is an irreversible decision, we recommend you take advantage of the free and impartial guidance services like MoneyHelper or you seek professional financial advice.

Are there any limits or other considerations?

No, there are no specific limits, but you should ensure that an annuity provider can offer you the features you require and you should always shop around for the best deal. If you have a small pension pot, it may not be enough to buy a guaranteed income. However, if you have a number of small pensions built up, you may be able to consolidate them into one larger pot, giving you the option to use them together to buy a guaranteed income.

Yes, there are additional considerations that may impact your decision making and future plans. These are:

  • If you are in poor health or your life expectancy may be limited by lifestyle decisions (for example, if you smoke, drink or are overweight), you may qualify for an enhanced annuity. Enhanced annuities can provide significantly higher levels of income so, if you think your health or lifestyle may be relevant, be sure to bring this to the attention of any provider that offers you a quote.*
  • If you are suffering from extreme ill-health and your life expectancy is severely impaired, you may be able to take all of your pension savings tax-free. This is normally permitted if you are under 75 and are not expected to live for a further 12 months. If you are over 75, you may still be able to access your pension savings, but you will be taxed at your highest marginal rate.
  • Always shop around to ensure you get the best value for your money. You can use your Open Market Option to transfer your pension savings from Creative Pension Trust to your chosen annuity provider. There is no charge for this.
  • Annuity rates (the amount of income you are offered for every pound used to purchase the guaranteed income) frequently vary. When comparing quotes, be aware these are normally only valid for short periods of time.
  • Your age will impact the annuity rates offered to you. The earlier you want to retire, the lower the rate will be. This will mean accepting a lower income if you plan to retire early.

* Don’t worry – annuity providers do not penalise you or provide worse terms because of your state of health.

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