Tax Free Cash Lump Sum


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Pension Annuities: The Open Market

Tax Free Lump Sum - Free Specialist Advice

When you buy your annuity (usually when you retire) you can take up to 25% of your pension fund as a tax free lump sum! So a £100k pension fund would allow you to take £25k tax free leaving you with £75k to use to buy your annuity. This does mean that your regular retirement income will be reduced with the smaller fund to use for this purpose. It's as simple as that, no catches other than less with which to purchase your annuity.

Most people do elect to take the tax free lump sum at the same time they start to receive the annuity income. However, a lesser known and lesser used alternative is Pension Release.

With Pension Release you can take the benefits early from a pension that you are not currently receiving. You can release up to the maximum tax free cash allowed and use the balance to either take a monthly income, or invest the balance to try to improve the monthly income you would receive when you retire at a later date.

It is worth pointing out that the whole purpose of making contributions to pension schemes is to provide an income during retirement. It is therefore important to be aware that releasing your pension benefits early could reduce your income and your standard of living at retirement. This is why pension release is only suitable for a limited number of people and circumstances and shouldn't be seen as an easy way to raise cash.

Get The Best Annuity Rate And Increase Your Retirement Income By Up To 40%.

The rate you get for any annuity type will very much depend on several factors, for example:

i) Whether you require a joint life or single life policy.
ii) Do you want the policy to be indexed linked so that it increases in line with inflation?
iii) Whether you have any health or lifestyle considerations.
iv) Do you wish to take the 25% Cash Tax Free Lump Sum from your pension fund?

The table below is for illustration only but gives an idea of what your provider may offer on a £100k pension fund after the £33k tax free lump sum is taken. We may be able to increase your retirement income by up to 40%!

Level annuity rates
Male Single Life Female Single Life
  Male 50 £5,745  
  Male 55 £6,124  
  Male 60 £6,675  
  Male 65 £7,393  
  Male 70 £8,368  
  Male 74 £9,590  
  Female 50 £5,572  
  Female 55 £5,882  
  Female 60 £6,338  
  Female 65 £6,892  
  Female 70 £7,790  
  Female 74 £8,680  
Level annuity rates + 10-year guarantee
Male Single Life Female Single Life
  Male 50 £5,716  
  Male 55 £6,088  
  Male 60 £6,580  
  Male 65 £7,214  
  Male 70 £8,076  
  Male 74 £8,883  
  Female 50 £5,546  
  Female 55 £5,858  
  Female 60 £6,276  
  Female 65 £6,818  
  Female 70 £7,632  
  Female 74 £8,364  
3% escalation annuity rates
Male Single Life Female Single Life
  Male 50 £3,536  
  Male 55 £4,024  
  Male 60 £4,658  
  Male 65 £5,412  
  Male 70 £6,444  
  Male 74 £7,668  
  Female 50 £3,362  
  Female 55 £3,710  
  Female 60 £4,276  
  Female 65 £4,924  
  Female 70 £5,798  
  Female 74 £6,734  

In order for us to quote you an accurate rate (and we will get you the best rate from all UK providers) we do need to clearly understand your individual circumstances and requirements. We will then do all the hard work at no cost to you, for you to then make an informed decision. We cannot give accurate online quotes without knowing the full details but we will save you a lot of time and money once we understand your requirements. Please complete our FREE No Obligation Form to speak to us today and you could increase your retirement income by up to 40%!

Choosing The Right Annuity. The Open Market Option.

A recent survey showed that 2/3rds of people buy their annuities (pension income) from the same provider with whom they built up their pension.

Many people are unaware that they have the right to give their pension pot to whichever annuity provider will pay them the highest income for life. This is known as an open market option. This can make a significant difference to the level of income you receive and therefore your lifestyle in retirement.

You can shop around and obtain quotations from all of the leading providers yourself, a time consuming exercise. Alternatively you can ask a specialist to do this on your behalf. Please complete our no obligation form and we will obtain a quotation for you based on the highest rates we can achieve for you.

Buying an annuity is one of the most important financial decisions you will ever make as it determines the level of income you will receive from retirement for the rest of your life.
It is therefore imperative that you obtain the best level of income from the pension pot you have built up over your working life to ensure you enjoy the highest quality of life in retirement.
Whether you have already decided or you require advice on the most appropriate annuity, or indeed if phased retirement or income drawdown would be more beneficial, then please complete the no obligation quotation form and we will advise you of the best rate we have to offer.

What Should Influence My Choice Of Annuity?

You need to think about more than your current income requirement. How much money will you need in future? Will you need to make provision for your husband or wife or civil partner as well? Are you planning to take a pension commencement lump sum from your pension pot - doing so will reduce the amount of money available for annuity purchase.

In addition to a basic income for you in retirement, your pension fund can also be used to buy a number of additional annuity benefits, such as pensions for dependants, guarantee periods, etc. The basic annuity offers a set level income that will not change. However, in addition to extra benefits you may also elect to purchase an annuity that pays more over time.

However, it is important to remember that the more "additional benefits" you wish your pension to provide, the lower your actual income is likely to be. This is because each of these benefits has a cost, which reduces the proportion of your annuity that is available to provide you with an income. Once the annuity has started you may not change the benefits selected, which means it's important you consider your options very carefully.

When Do I Have To Buy An Annuity?

If you are among the diminishing band of people with a final salary pension then you won't ever have to worry about annuities. However, chances are, unless you are a civil servant or an MP that you won't be in that number.

When you save for your retirement through any kind of pension plan, the money you put in is free of tax and then grows tax efficiently. This is very generous of the government but this is as far as its generosity extends. You might think that the accumulated pension pot is your money to do with as you please. You would be wrong!

You may take part of your pension savings as a tax-free lump sum (now officially known as a pension commencement lump sum or PCLS) up to 25% of the value of your pension funds.

You are no longer required to purchase an annuity with the remainder of your pension funds but there are strict rules and potential tax charges in place that hedge round what you can do with the money. The government's view is that we all get generous tax breaks to save for our pensions and that any money so accumulated should be used to create a pension rather than as a form of saving for our heirs.

You may opt instead of an annuity to take an Unsecured Pension this is the post A Day form of income draw down, whereby you can take up to 25% of your fund as a PCLS and leave the balance invested. You may then take an income, if you wish each year, of between zero and 120% of what a level, standard annuity would pay to someone of your age.

After age 75, you may continue doing a more restricted form of income draw down, called taking an 'Alternatively Secured Pension' or ASP. This allows you to take an annual income of between 0-70% of what a standard level annuity would pay a 75 year old, however old you are. This means that your income will not rise in line with your age.

Leaving your pension funds invested means you are potentially at risk from adverse moves in the market value of what your savings are invested in. This can be a highly risky strategy. It is imperative that you make sure you get independent financial advice.

Will I Pay a Fee?

We are paid by pension providers for the work we do and do not charge you a fee.

Will You Shop Around For Us?

In the past, pension annuity advice has been difficult to find, but now by using our dedicated software we are able to make this specialist advice available to everybody.

Taking time now to shop around is time well spent, but you need to be aware of all your options, not just the annuity option. This is where we can help you.



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