Lifetime Annuities

In an environment of longer retirements, market volatility and increasing scrutiny of foreseeable harms, lifetime annuities remain the most direct way to turn a portion of a client’s pension into guaranteed income for life. Used as part of a broader toolkit, they can form the core foundation of a resilient retirement plan, working alongside Fixed Term Income Plans, Purchased Life Annuities, drawdown, ISAs and GIAs.

Lifetime annuities convert pension savings into a predictable income that cannot be outlived. This makes them a powerful tool for managing longevity risk and providing clients with confidence about meeting their day‑to‑day needs throughout retirement.

What is a lifetime annuity?

A Lifetime Annuity:

• Pays a guaranteed income for the rest of your client’s life
• Can be tailored with options such as joint life, escalation, guarantee periods, value protection and income escalation
• Is purchased using pension funds, with income taxed as pension income at their marginal income tax rate
• The key advantage is certainty.

Regardless of how long the client lives or how markets perform, the income continues as agreed.

Where lifetime annuities fit in a modern retirement strategy

Underpinning essential expenditure

The most effective use of lifetime annuities is to secure the core, non‑negotiable elements of a client’s budget, for example:

• Housing costs (rent, service charges, ground rent)
• Utilities and basic living expenses
• Insurance, council tax and other regular commitments

By combining state pension, any DB income and a lifetime annuity, advisers can create a stable income floor that covers these essentials. This reduces the pressure on drawdown and other investments, particularly in periods of market stress.

Managing longevity risk

Clients are living longer, and many underestimate their potential life expectancy. Relying solely on drawdown exposes them to the risk of depleting their fund too early, especially if returns are weaker than assumed or withdrawals are higher than planned.

Allocating a portion of the pension pot to a lifetime annuity can:

• Provide peace of mind that a minimum income is guaranteed for life
• Reduce the reliance on portfolio performance in very old age
• Support more realistic withdrawal strategies from remaining invested assets

This is especially important for clients with limited capacity to adjust spending or return to work if things do not go to plan.

Supporting clearer client conversations

Lifetime annuities help turn abstract risks into tangible planning decisions. Advisers can frame discussions around questions such as:

• “What level of income do you want guaranteed for life, regardless of markets?”
• “How much flexibility are you willing to give up on this portion of the fund in return for certainty?”
• “Which expenses would be hardest to cut if markets performed badly?”

This makes it easier for clients to understand the trade‑offs between security and flexibility, and to agree on a sensible split between guaranteed and variable income.

Benefits for advisers and clients

For advisers, Lifetime Annuities offer:

• A straightforward way to demonstrate management of longevity and income sustainability risks
• A clear, auditable link between client objectives and the use of guarantees
• A stable anchor around which investment and withdrawal strategies can be built

For clients, they provide:

• Guaranteed income for life, tailored to their needs and preferences
• Confidence that essential costs are covered, whatever happens in markets
• Greater comfort in taking appropriate investment risk with the rest of their assets

Used alongside Fixed Term Income Plans, Purchased Life Annuities and drawdown, lifetime annuities are a central component of treating annuities as a flexible toolkit, rather than a one‑off decision. They help transform a pension pot into a durable, dependable income strategy that can support clients throughout their retirement journey.