Important information

You may be aware of the IT issues impacting some companies at this time.  We’d like to reassure you that all our services are available, and our phone lines are open Monday – Friday, 9am – 5pm. If you’d like to contact us, you can find our details here.

Lifetime Annuities & Scheme Pension

A secure, regular income for life

Our lifetime annuity uses the money saved in your pension plan to give you a guaranteed, regular income for life. You can also choose to provide an income for your chosen beneficiary(ies), like a spouse or partner. Once you’ve set up your policy, you can’t normally revise or cancel it so we recommend that you seek professional advice before you apply.

If you have recently received a letter regarding tax code changes that may impact the tax you pay on your annuity income, you may need to contact HMRC to discuss your taxation position. You can do this by logging onto your online Personal Tax Account via www.gov.uk, calling the helpline on 0300 200 3300, or via post Sefton Area, HM Revenue & Customs PAYE, PO Box 1970 Liverpool, L75 1WX. 

If you have any questions about this letter or need assistance in understanding any of the points raised, please contact retirementservicing@canadalife.co.uk 

Here’s everything you need to know about our Lifetime Annuities and Scheme Pension ­– key features, how it works, helpful links, guides and brochures.

What is it?

The Lifetime Annuity and Scheme Pension are annuity policies providing a guaranteed lifetime income. Depending on your circumstances, you can choose to provide an income and/or lump sum after your death to a spouse/partner or other beneficiaries.

Eligibility

You must be aged 55 or over with pension savings held in a UK registered pension scheme. The minimum required is £10,000 after taking any tax-free cash lump sum.

Advice

At Canada Life, we can't give personal recommendations about our products. You’ll need to speak with an adviser to see if the product is right for you. If you don't have an adviser, you can find more information here.

Tax-free cash

You can transfer funds from a UK registered pension scheme to buy a Lifetime Annuity. We’ll hold your pension savings until all monies from the transfer(s) are received. At this point we will pay out a tax-free cash lump sum of up to 25% of the transferred amount.

If the transfer is coming from a drawdown plan, we won’t make a tax-free payment as you would have received it from your existing pension plan.

Income payment options

You can choose to have your income payments:

  • Remain at a fixed level for the remainder of your lifetime
  • Increase by a fixed percentage every year (between 0.01% and 10%)
  • Vary in line with the Retail Prices Index
  • Vary in line with the Retail Prices Index but capped at 5% or 2.5%
  • Paid into your bank account on a monthly, quarterly, half-yearly or annual basis
  • Paid in advance, where the first payment will be paid as soon as possible after we’ve set up the policy
  • Paid in arrears, for example if you choose monthly, it will be paid at the end of the first month

Enhanced Annuity

An enhanced annuity provides a guaranteed income for life. Enhanced annuities work on the assumption that your life expectancy is reduced because of your health and lifestyle choices. By this we mean whether you have a medical condition like cancer or a heart problem, or whether you’re a smoker or overweight – it could be a combination of these factors. Because of this, your income is often higher than what you’d receive if you didn’t have medical issues or you had a healthier lifestyle.

We’ll take the above into account before we can calculate your proposed income. You’ll need to complete a health questionnaire before you apply to see if you qualify for an enhanced annuity.

Death benefits

Your income will stop when you die unless you opt to include death benefits. You can choose one of the following options:

  1. Payments to a second annuitant - choose a joint income plan where we’ll pay up to 100% of your income to a second annuitant following your death
  2. Guarantee payment period - choose a guaranteed period (from one month to 30 years) which guarantees how long we will pay your income, even if you die during the term
  3. Value protection - choose to have a lump sum paid to your beneficiary(ies) when you die. This is a way of protecting your original investment minus any income already received

Charges

We can pay any charges you incur from your financial adviser for advice or services from your pension money before it’s applied to the annuity.

Tax on your income

We’ll tax your annuity income at your marginal income tax rate once we receive a tax code from HMRC or you provide a valid P45 certificate. If we don’t receive this, we’ll apply a temporary, emergency tax code.

The amount of tax you pay will depend on your total income from all sources and your personal allowance.

Tax on death

If you die before your 75th birthday, your beneficiary(ies) will receive a tax-free lump sum or tax-free income.

If you die from age 75 onwards, we’ll tax the payments at your beneficiary’s marginal rate of income tax.

Risks to consider

Just so you’re aware, we’re unable to change the terms of your annuity policy once we’ve set it up.

You should also be aware that

  • Your income will stop when you die, unless you opt to include death benefits
  • Inflation will reduce the spending power of your income, especially if you haven't chosen a rising income
  • HMRC tax rules may change in the future
  • Other annuity providers may provide you with a better outcome

Key documents

Approved on 07/05/2024.