Offered a cash lump sum or a guaranteed income for life — from a pension, an annuity or a settlement? This weighs them up with tax, inflation, investment returns and how long you expect to live, and shows the age at which the guaranteed income overtakes taking the cash. 2026/27 rates.
Before you decide: swapping a guaranteed income for a lump sum (or the reverse) is often irreversible and one of the biggest financial decisions you will make. Use the free government service Pension Wise (over-50s) or MoneyHelper, and consider a regulated financial adviser — transferring a defined-benefit pension worth over £30,000 legally requires regulated advice. This tool gives estimates for guidance only and is not financial advice.
Plan-to age: UK life expectancy at 65 is roughly 85–87, but a large share live well beyond — planning to 90+ is prudent.
The invested pot rises with returns and falls as you draw the income. Where the line hits zero is your break-even age; the dashed line is the age you planned to.
It depends on how long you live, what return you could earn, your other income, your health and whether you want to leave money behind. A guaranteed income removes investment and longevity risk; a lump sum offers flexibility and the chance of more if you invest well. This tool shows the trade-off, but a decision this large is worth taking to Pension Wise or a regulated adviser.
It is the age at which taking the guaranteed income has paid out more than taking the lump sum and investing it at your assumed return. If you expect to live past the break-even age, the income tends to win; if not, the lump sum does. Because it depends on the return you assume, try a range of returns to see how sensitive the answer is.
A guaranteed income is taxed as income each year. Money drawn from an invested lump sum is usually taxed the same way, so tax does not change the comparison much — unless you can shelter the lump sum in an ISA, where withdrawals are tax-free. The calculator applies one marginal rate to both sides and assumes any investment growth is held in a tax wrapper.
Yes, in the sense that it is paid for life whatever markets do and however long you live, which an invested pot cannot promise. The price of that certainty is less flexibility and usually nothing left to pass on. Whether it is worth it depends on how much guaranteed income you already have, such as the State Pension, and your appetite for risk.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.