Planning for retirement is not just about saving, it is about turning those savings into a steady, reliable income once work stops. One of the ways to do this is through a pension annuity.

These plans are designed to provide a dependable stream of income in retirement, helping to give you peace of mind that your essential expenses will be covered, regardless of market ups and downs.

So how do they actually work?

1. Building your pension (the saving years)

While you are working, you and sometimes your employer make regular contributions into your pension. The money is invested with the aim of growing steadily over time.

2. Turning savings into income (the retirement years)

When you retire, your pension pot can be used to provide a guaranteed income. This can be arranged to pay you either:

• A fixed income for life, or
• A fixed income for a set term, such as 10 or 20 years.

Depending on the type of annuity plan, you can also choose for payments to continue to a spouse or partner after your death.

3. What determines your income amount

The payments you receive will depend on:

• The total contributions made into your pension.
• Your salary and length of service (for workplace or defined benefit pensions).
• When you start drawing income – earlier retirement generally means smaller payments.
• Whether you select single-life, joint-life, or fixed-term options.

4. Managing tax and inflation

Your pension income is usually taxed as regular income, though contributions often benefiting from tax relief during your working years.

Some annuity plans include inflation-linked increases, helping your income keep pace with the cost of living, while others remain fixed for simplicity and certainty.

In summary:
A pension fixed income plan, more commonly known as a pension annuity takes the money you have built up during your career and converts it into a regular, reliable income, helping make your retirement years more predictable.

What’s next?
In my next article, “Pension Annuity Fixed Income Plans”, I will look more closely at the key advantages of these plans – from guaranteed income and reduced market risk to flexibility at maturity.

Contact us on 0330 320 9280, email info@cravenstreetwealth.com or complete our online enquiry form to explore if a pension fixed income plan could form part of your retirement strategy.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

 References to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of publication. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.

 You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Craven Street Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (FCA). The FCA does not regulate tax advice.