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Transfer out and buy a regular income for life from an insurance company

At a glance

If you choose to transfer out of the Scheme and buy a regular income from an insurance company, known as an annuity, you’ll have:

  • A guaranteed income for the rest of your life – you can choose the level of benefits and cover you need to match your priorities
  • Tax-free cash – the option to take up to 25% of your transfer value as a tax-free cash lump sum
  • Optional ill health annuity if you have recognised health issues, you are a smoker, drinker, have high blood pressure etc. This means you could get a higher income and is known as enhanced terms
  • Optional yearly increases to your income to protect against increases in the cost of living (inflation), in exchange for a lower starting income, known as an increasing annuity
  • Optional pension for your eligible dependant (your spouse, civil partner, partner and/or children) on your death, in exchange for a lower regular income, known as a joint life annuity
  • Optional lump sum payable to your eligible dependant if you die soon after retirement, known as a guarantee period

Harold’s choice

What was important to Harold was a regular income each month, similar to the Scheme pension, but tailored to better suit his circumstances. Harold took financial advice and decided to transfer out of the Scheme and buy an annuity from an insurance company.

Harold’s choice is just an example and does not suggest a particular option that you should choose yourself. Please look at all of the options available to you and consider seeking independent financial advice before making any decisions about your own benefits.

Why this option might suit you

Here is a list of characteristics that this option provides or doesn’t provide. Have a look through and see if these characteristics suit your personal circumstances. You may be required to take financial advice to access this option.

The reassurance of a regular income for life YES Buying a regular income for life from an insurance company gives you the reassurance of a regular income paid, normally monthly, to you for as long as you live, a bit like your salary is now and in a similar way to your Scheme pension.

This is particularly useful if:

  • this is going to be your main source of income in retirement
  • you appreciate the security and predictability of a set, regular income
  • you cannot afford to, or don’t want to, take risk
Pension increases to protect against inflation OPTIONAL You can choose to buy an annuity that increases in value each year to protect you against increases in the cost of living (inflation). By this we mean as the cost of things like fuel, bread, milk etc. go up, so does your pension income. This comes at the cost of a reduction in how much money you get each month. You can read more below in the section ‘Income for life annuity options’
A pension for my eligible dependant on my death OPTIONAL ou can choose to buy a joint-life annuity or an annuity with a guaranteed period which will provide an income to your eligible dependant when you die, giving additional reassurance for you and your loved ones. This comes at the cost of a reduction in how much money you get each month. You can read more below in the section ‘Income for life annuity options’.
Leaving an “inheritance” NO No, but there are some options to provide an income for your loved ones on your death. You can read more below in the section ‘Income for life annuity options’.
Something easy to manage YES Super easy, once you’ve bought your annuity, the income from it will be paid to you regularly, just like your salary is now. You’ll need to shop around for the right annuity for you. To learn more about this, you can visit the Money Helper website.
Money to use now YES In exchange for a reduced regular income from your annuity, you can take up to 25% of your transfer value as a tax-free cash lump sum when you retire.
The flexibility to change my income when I like / need NO The amount you receive from your annuity will be fixed but could increase automatically each year if you choose that option.
The ability to invest my money myself NO There is no option to manage any investments.
Suitable if I expect to live a long time YES Definitely. Your annuity will be paid to you for as long as you live.

It’s worth noting that on average (based on national figures from the Office for National Statistics) we’ll live until our mid-80s, however there’s a 1 in 4 chance you’ll live in to your 90s and 3 in every hundred people retiring now will live to be 100 years old.
To help you decide which retirement option is right for you, the Trustee has arranged for Origen Financial Services to provide eligible Scheme members with one round of paid-for financial advice. This includes regulated advice in relation to the transfer option. For more information go to the Decide page.
Income for life (annuity) optionsWhat are your options if you buy a regular income for life (an annuity)?
Feature Option 1 Option 2 Comparison
Pension increases An income which increases during retirement, either at a fixed rate or based on inflation.

This is known as an ‘increasing annuity’.

 An income which remains level throughout retirement.

This is known as a ‘level annuity’.
  • A level annuity will start at a higher initial amount than an increasing annuity but will not increase during retirement, so you need to be aware that inflation will erode the value of your income over time
  • An increasing annuity will start at a lower initial amount than a level annuity but will increase (normally in line with inflation) during retirement
Spouse’s pension An income which continues to be paid to your eligible dependant upon your death (at a reduced level).

This is known as a ‘joint life annuity’.

 An income which ceases on your death.

This is known as a ‘single life annuity’.

 An annuity which includes an income for your eligible dependant after your death will be lower than an annuity paid just to you, as it is expected to be paid for longer.
Guarantee period An income which stops on your death (or the death of your eligible dependant).

This is known as an annuity with ‘no Guarantee period’.

 An income which is guaranteed to be paid for a minimum period.

This is known as an annuity with a ‘Guarantee period’.
  • An annuity which includes a Guarantee period will have a lower income than an annuity which stops on your death
  • However, if you die shortly after you start to receive your income, a Guarantee period will ensure your loved ones still get something back
Health / enhanced terms An income which does not take into account your health.

This is known as a ‘standard annuity’.

 An income which takes into account your health.

This is known as an ‘enhanced annuity’.
  • If you have a diagnosed medical condition, smoke or have a poor lifestyle, you may be eligible for enhanced terms
  • An annuity with enhanced terms will typically have a higher income than a standard annuity as it is expected to be paid to you for less time
Tax
Tax-free cash lump sum

  • You can take some of your transfer value as tax-free cash (usually up to 25% of your transfer value)
 Income (subject to tax)

  • Your annual income will be taxed at your marginal rate of income tax for that year
  • As your annuity income is stable, you can expect to pay a similar level of tax each year (subject to any other income you have)
The contract for the advice would be between you and Origen and the advice provided is confidential. It is your choice whether to use Origen. The Trustee and Aptia (formerly Mercer) are not responsible for any advice you receive or any decisions you make, or actions you take, as a consequence of receiving advice.
Built on behalf of the The First Bus Retirement Savings Plan by Willis Towers Watson. The information
  • is a summary of the applicable law and the Scheme’s trust deed and rules as at May 2021
  • is not a definitive statement of the applicable law or the Scheme’s trust deed and rules and is not legally binding
  • does not constitute financial advice or create any entitlements for members (or anyone else) in relation to the Scheme
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