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In this third episode of our Pensions Basics mini-series, we turn our attention to two sources of guaranteed income in retirement: the State Pension and annuities.
In Episodes 51 and 52, we explored Defined Contribution (DC) and Defined Benefit (DB) pensions. This episode builds on that foundation by looking at income you can rely on regardless of investment markets — an increasingly important consideration for many people approaching retirement.
For the 2025/26 tax year, the new State Pension is:
Under the triple lock, the State Pension is set to increase by 4.8% from April 2026, taking it to roughly:
This means the State Pension is edging closer to the personal allowance, raising important tax-planning considerations.
The triple lock guarantees that the State Pension increases each year by the highest of:
“The triple lock has done exactly what it promised to do, but it’s also raised some big questions about affordability and how the state pension will work in the future.”
While it remains government policy for now, the cost of the triple lock means it may change in future. When we plan for retirement, we assume the State Pension will continue, but remain realistic that the mechanism behind increases could evolve.
Rather than relying on tables, it’s best to use the State Pension Age Calculator on the government website to confirm your exact entitlement age.
Under the new State Pension rules:
Qualifying years can come from:
You can check your State Pension forecast online and see whether it’s worth filling any gaps. In many cases, buying missing years can represent excellent value, particularly if you are close to retirement.
You don’t have to take the State Pension as soon as you’re eligible.
Deferral tends to make sense only in limited circumstances — for example, if you are still working and paying higher-rate tax when the State Pension would otherwise start.
An annuity is an insurance product that converts a pension pot (or part of it) into a guaranteed income, usually for life.
Unlike drawdown, annuity income:
However, higher interest rates and improved death benefit options have made annuities relevant again for many retirees.
When you buy an annuity, you exchange some or all of your pension pot for a guaranteed income.
The income you receive depends on several factors:
“For low-risk individuals, an annuity can act as the backbone of a retirement plan, especially when it’s combined with the state pension.”
Annuities provided by PRA-authorised insurers are covered by the Financial Services Compensation Scheme (FSCS).
If an annuity provider were to fail:
The State Pension and annuities can form the bedrock of a secure retirement, particularly for those who value certainty over flexibility.
“Sometimes the right decision isn’t about maximising income — it’s about peace of mind and being able to sleep at night.”
For some people, annuities provide the entire retirement solution. For others, they work best alongside drawdown and other assets, covering essential expenditure while allowing flexibility elsewhere.
In the next episode, we’ll bring everything together with a real-life case study, showing how DC pensions, DB pensions, annuities and the State Pension interact in practice.
If you’d like help understanding how guaranteed income fits into your retirement plans, speak to a regulated financial planner at Wealth of Advice.
If you want a better view of what your future could be, we'll have a chat and work out if we make a good fit for you and your financial picture.
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