Guaranteed
lifetime income
Buying an annuity
If you’d prefer predictable income to flexible withdrawals, you could buy an annuity. An annuity lets you turn some or all of your pension pot into a guaranteed regular income. There are no investments, just a promise from the annuity provider to pay you what’s been agreed.
You’ll know how much you’re getting and when, giving you certainty and peace of mind. You’ll know exactly how long it will last, whether for the rest of your life or a fixed number of years. And you can also choose options such as payments to a partner after you’re gone or income that rises over time.
You can usually take 25% of your pot tax-free[⁴] before buying your annuity. The rest is used to provide your income, which is taxed as income. Or, if you already have a flexible income pot with us, you can use all or part of that to buy an annuity too.
It’s a big decision and, once it’s set up, you can’t usually change it. So it’s worth shopping around to find the right deal for you.
Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
Why might you buy a lifetime income?
- You’re worried about the ups and downs of investing and want a guaranteed income for life.
- You have no other income or savings to rely on in retirement.
- You want to avoid having to make financial decisions that affect your income in later life.
- You don’t need the flexibility of taking lump sums or variable income available from the other options.
What happens to your pension savings?
If you decide to use all of your pension to purchase an annuity from an annuity provider, we will usually close your account. This is because you will have bought a guaranteed income, leaving your pension account empty.
If you only use some of your pension to buy an annuity, what’s left stays invested[¹] in your NatWest Cushon pension. You still have full flexibility to choose what you do with that portion.
Example: Lifetime income (annuity)
Let’s say you have a £100,000 pension pot and you’re thinking about using it to buy a guaranteed income for life.
You decide to take 25% tax-free – that’s £25,000 directly into your bank account.
You then use the remaining £75,000 to buy an annuity – this gives you a regular income for the rest of your life. So what might that look like?
If you’re 65 and in good health, £75,000 could give you around £4,500[⁵] a year, guaranteed for life. (This is based on a single-life annuity with no extras and a level income – in other words, your income stays the same each year.)
Here’s how it breaks down:
You get £25,000 tax-free[⁴] now
£75,000 goes to buy an annuity
You receive about £375 a month (£4,500 a year)[⁵] – guaranteed for life
The income from the annuity is taxable as income, similar to a salary
An annuity could be a good option if you like the idea of certainty – knowing you’ll have a regular income you can count on, no matter how long you live.
How to buy a lifetime income
If you want to arrange a guaranteed income for life, you'll need to choose an annuity provider. While we do not offer annuities ourselves, you have the right to use the open market option - which means you can shop around and compare annuity offers from different providers.
This is important because annuity rates and features can vary widely. Exploring the open market gives you the opportunity to find the product that you want and may help you secure a higher income for life.
If you would like support with this process, we have partnered with Hub Financial Solutions. For a fee of £180, they will provide you with a detailed report outlining your options and will guide you through arranging a guaranteed income for life from the provider you choose. If you purchase an annuity through them, Hub Financial Solutions also receives a commission from your selected provider.
Guided Annuity Service is charged at £180 (inclusive of VAT).
Access your pension in the Cushon app
If you are over 55 and a NatWest Cushon member you can organise your annuity in the Cushon app.
- Open your Cushon app
- Tap on your NatWest Cushon pension pot
- Tap 'More actions'
- Tap 'Access your pension'
- Tap 'Buy a guaranteed income for life'
- Tap 'Pass my details onto HUB'
Help to make the right decisions
Financial guidance: general know-how to help you make your own decisions
Guidance is a great place to start to build your knowledge about pensions and other personal finance topics. It covers need-to-know info and tips that work for most people, but it isn’t tailored to your goals or circumstances.
If you’re comfortable making your own decisions, guidance services give you the chance to ask questions and get answers from knowledgeable experts. You can get a clearer understanding of your choices, but you can’t get a specific recommendation or advice.
You can access MoneyHelper, a free service provided by the government to provide general guidance on your pension options, by visiting the MoneyHelper website or by calling 0800 011 3797.
If you are aged 50 or over, you can also book a free and impartial Pension Wise appointment. This gives you 45-60 minutes of specialist pension guidance to help you understand your options. It can be on the Internet, over the phone or face-to-face and local to you.
Financial advice: specific recommendations from a professional adviser
Professional financial advice is different to financial guidance because it’s specifically tailored to you.
An independent financial adviser can talk you through your options, explain how they fit with your other financial products, and also make a personalised recommendation based on your goals and circumstances.
They can also work with you to set realistic goals, create a personalised financial plan that considers your specific needs, and make sure your savings, taxes and more are working together to your best advantage.
It’s not free though. If you hire a professional financial adviser, you should expect to pay a fee. You can find a list of regulated financial advisers at MoneyHelper.
Watch out for pension scams
You’d be surprised by how convincing and sophisticated scammers can be. Watch out for emails, calls or letters from businesses or strangers who claim to have a great deal for you.
Reject unexpected offers.
Know who you are dealing with.
Check any contact details.
Don’t be rushed or pressured.
Get impartial information.
For more tips and advice visit the ScamSmart website.
Stay in control with the Cushon app
Use the Cushon app to keep your pension close at hand and make it easier to plan the future you’re hoping for.
- Access your pension options.
- Set a target age for accessing your pension.
- Choose beneficiaries to leave your pension to.
- Manage your regular contributions or withdrawals.
- Find and combine[³] old pensions.
- Choose your own investments if you'd like.
We do not charge, but some pensions may charge an exit fee.
Combine your pensions
It could be hard to know what you've got to rely on in retirement if your pension savings are in multiple pots or even lost. Iris tracks down your old pots and combines them into a single pension with NatWest Cushon. Completely free of charge.
Common questions about buying a lifetime income
If you're considering buying an annuity there are some important things to consider:
Health
If you’re in poor health or if your life expectancy is limited by lifestyle decisions (for example, if you smoke, drink or are overweight), you may qualify for an enhanced annuity. It’s a bit morbid but enhanced annuities can provide significantly higher levels of income because they aren’t expected to pay out for as long. So, if you think your health or lifestyle could be relevant, bring this up when you’re asking for a quote.
If you suffer from serious 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’re under 75 and are expected to live for fewer than 12 months. If you’re over 75, you will be taxed at your highest marginal rate.
Annuity providers
Always shop around to get the best value for money. You can use your Open Market Option to transfer your pension savings from NatWest Cushon to your chosen annuity provider. There’s no charge for this.
Annuity rates
Annuity rates can vary. (That’s the equivalent amount you’ll get as income for each pound you spend on your annuity.) Use these rates to help you compare the value of your quotes, but be aware they’re normally only valid for short periods of time.
Your age will impact the annuity rates offered to you. The earlier you want to start your annuity, the lower the rate and the lower your income.
The size of your pension pot
The larger your pension pot, the greater the guaranteed income you can buy with it. You may wish to put back the date you begin so your pension pot can continue to grow. You should review how your pension savings are invested.
No, there are no specific limits – it’s all about the deal you make with the annuity provider. You should always shop around for the best deal and make sure you’re getting the benefits you need. That said, if you have a small pension pot, it may not be enough to buy a guaranteed income. But if you have a number of small pensions built up, you may be able to combine them into one larger pot and get a better deal.
You get to choose which type of annuity you’d like when you make a deal with the annuity provider. There’s a wide variety, 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 most appropriate for your specific needs. Generally, the more features you choose, the lower the starting income will be.
As this is an irreversible decision, we recommend you seek professional financial advice or make the most of impartial guidance services like Pension Wise.
Yes, guaranteed income from an annuity is treated as taxable income and will be taxed at your own rate of income tax each year.
Yes, the main benefit of an annuity is that it guarantees your income, either for a fixed period or for the rest of your life.
You can also choose additional guarantees, such as ongoing payments to dependants when you die or guarantees to inflation-proof your income. Be sure to check with your annuity provider.
Yes, when you buy an annuity you can choose to take up to 25% of your pension pot as a tax-free lump sum[⁴], up to a maximum value of £268,275.
If you choose to do this, you’ll have less money left to buy an annuity, which will mean accepting a lower income.
Your annuity payments will stop. But some annuities can be paid to your partner after you die if you choose this option. This usually means accepting a lower income yourself.
Pension expert, Sarah, explains how we invest your money over time.
Other ways you can access your money
1. Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
3. You should understand the features and charges of other pensions first and seek professional financial advice if you are not sure. Check with your product provider before transferring, as there may be a penalty for leaving their scheme.
4. Some people are allowed to withdraw more than 25% tax-free cash. This is known as Protected Tax-Free Cash. This could apply to you if you have a certificate from HMRC confirming your protection or your pension has scheme-specific tax-free cash attached to it.
5. Based on an annuity rate of 6%, which means for every £100 you use to buy an annuity, you would get £6 each year as income. This is an example annuity rate. Annuity rates can go up or down, which means the amount of income you get when you buy an annuity could be more or less than the example. The numbers provided are for illustration only and shouldn’t be relied on to make decisions. This example is based on a single life annuity with no extras and level income.