According to a September 2025 Financial Planning Today article, 39% of people say a guaranteed income is their main priority in retirement. Knowing how much income you’ll receive from certain sources can provide the certainty you need to enjoy retirement with greater confidence.

There are several ways you might create a guaranteed income in retirement – here are three common options. 

1. State Pension

While the State Pension often isn’t enough to cover all of your retirement spending, it can provide a reliable base income.

The new full State Pension pays an income of £230.25 a week in 2025/26. To qualify for the full amount, you’ll need to have 35 qualifying years on your National Insurance record. If you have fewer years, you’ll usually receive a portion of the full amount. 

You can use the government’s State Pension forecast tool to understand how much you could receive and when you can claim it. 

As well as providing a regular income from State Pension Age until you pass away, the State Pension is valuable because, under the triple lock, it’s guaranteed to rise by at least 2.5% each tax year. This annual increase helps maintain your spending power in retirement.

2. Defined benefit pension 

If you have a defined benefit (DB) pension, also known as a final salary pension, it will provide you with a guaranteed income from the scheme’s pension age until you die.

The way your income is calculated varies between schemes, but it’s often linked to your average salary and how long you’ve been contributing to the pension. Usually, the income is linked to inflation, so the amount you receive will increase annually.

DB schemes can be generous compared to some other types of pensions, and the guaranteed income they provide could put your mind at ease if you’re worried about financial security in retirement.

In addition, DB pensions may offer other valuable benefits. For example, some schemes will continue to provide a guaranteed income to your spouse or civil partner if you pass away first. 

3. Annuity

If you have a defined contribution (DC) pension, you’ll have a pot of money you can use to create an income once you reach 55 (rising to 57 in 2028).

There are several ways you might access the money held in a DC pension, including purchasing an annuity if you value a guaranteed income.

Once purchased, an annuity will provide an income for the rest of your life. The income it provides will depend on annuity rates at the time of purchase. Rates can vary significantly between providers, so shopping around could help you get the most out of your money.

You can select an inflation-linked annuity so that your income rises each year, or a joint annuity, which would continue to pay a reliable income to your partner if you pass away first. 

Income flexibility may suit your retirement lifestyle

There are benefits to creating a reliable income in retirement, but it isn’t the right option for everyone. 

Indeed, in the survey featured in Financial Planning Today, 7% of people said they wanted the flexibility to take a higher income when needed. Even if a guaranteed income is a priority for you, you might still want to draw a flexible income to supplement it.

One example sometimes used in planning discussions is to use part of a DC pension to buy an annuity. If the income it delivers is enough to cover your essential outgoings, this could provide financial peace of mind.

You could leave the remaining half of your pension invested and access it flexibly as and when you choose. You could withdraw sums to pay for a holiday, give to loved ones, or increase your disposable income in your early years of retirement. 

A retirement plan that blends a guaranteed and flexible income could suit your lifestyle goals while still providing certainty.

Get in touch to talk about your retirement plan

We can work with you to create a retirement plan that’s tailored to your financial circumstances and lifestyle goals. Whether a guaranteed income is a priority or you’d prefer flexibility, please contact us to arrange a meeting with one of our financial planners. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

When you start searching for the best ways to build a retirement fund, private pensions might be the first option that comes to mind. 

However, they’re not the only way you can prepare for your life after work. An alternative is the Lifetime ISA (LISA) – a government-backed savings account.

While you might assume you can only use a LISA to purchase your first home, this isn’t its only purpose. 

In fact, according to Financial Planning Today in September 2025, 45% of LISA savers opened their accounts specifically to save for retirement, compared to 46% who opened theirs to purchase a first home.

Despite their popularity, LISAs come with strict rules you must understand before you can decide whether they’re the most suitable choice.

Continue reading to discover how a LISA compares with a pension so you can make an informed decision about which best suits your long-term needs.

Lifetime ISAs are another form of Individual Savings Account that allows you to save wealth

A LISA is a specific type of savings account that can be opened by anyone between the ages of 18 and 39. You can use it to either save for the deposit on your first home or build a fund for later life. 

As of 2025/26, you can contribute up to £4,000 each year to your LISA.

It’s important to remember that this forms part of your overall £20,000 ISA allowance. If you save the full £4,000 into your LISA, you can only invest a further £16,000 in your Cash or Stocks and Shares ISAs.

You can benefit from a government bonus when you contribute to your Lifetime ISA

There are two main types of LISA. A Cash LISA functions much like a traditional savings account, offering interest on your wealth. 

Meanwhile, a Stocks and Shares LISA allows you to invest your contributions in a range of assets. While this typically exposes you to risk, it gives your wealth the potential for more competitive long-term returns. 

For every £1 you contribute to your LISA, you can benefit from a 25% government bonus. This means that if you deposit the full £4,000, your total savings for the year could reach £5,000.

While you can only open a LISA until your 40th birthday, you can continue receiving the government bonus until you reach age 50. This could significantly bolster the overall value of your retirement savings.

Better yet, as is the case with other forms of ISAs, your savings and investments are completely free from Income Tax, Capital Gains Tax, and Dividend Tax. 

You will typically face a withdrawal penalty if you don’t use the wealth for specific reasons

Perhaps the main limitation with LISAs is that you must use the funds to pay for the deposit for your first home (provided the property costs £450,000 or less) or leave them invested until you reach the age of 60. 

If you withdraw funds for any other reason, you’ll typically face a 25% fee. This penalty removes the government bonus and takes a portion of your savings, meaning you could receive less than you originally put in.

For instance, if you contributed £10,000 over several years, you would receive a total government bonus of £2,500. If you then withdrew this early, the 25% charge would be £3,125, leaving you with just £9,375.

If you’re approaching the age of 40 and haven’t yet opened a LISA, it’s worth considering whether the remaining years of government bonuses make it worthwhile.

Pensions allow you to build a pot of wealth to support your dream lifestyle when you stop working

Pensions can be an effective ways to save for retirement.

You can tax-efficiently contribute to a pension while still benefiting from tax relief up to the value of the “Annual Allowance”. As of 2025/26, it stands at £60,000, or 100% of your earnings, whichever is lower. This includes personal and employer contributions, as well as tax relief. 

This is significantly higher than the LISA limit, allowing you to save more each year.

You can even benefit from tax relief, which is when the government essentially “tops up” any contributions based on your marginal rate of Income Tax. This means that a £100 contribution would only “cost”:

• £80 for basic-rate taxpayers
• £60 for higher-rate taxpayers
• £55 for additional-rate taxpayers.

This government bonus can make saving in your pension particularly attractive, as it could help you reach your long-term goals more quickly.

While you can take the first 25% of your pension without incurring tax, the rest could count as income

Unlike a LISA, you can begin accessing your pension from the age of 55 (rising to 57 by April 2028). 

You can then typically take the first 25% of your fund without incurring tax, while the remainder is treated as taxable income. 

This means that when you draw from your pension, those withdrawals are added to any income you receive in that year, such as from your State Pension or property wealth. They will then be taxed at your marginal rate. 

This means you could pay:

• 20% on income between £12,570 and £50,270 (the basic rate)
• 40% on income between £50,270 and £125,140 (the higher rate)
• 45% on income above £125,140 (the additional rate).

However, you do have flexibility over how you take the remainder of your pension fund. 

You could choose to withdraw it through flexi-access drawdown, allowing you to leave the rest of your fund invested to continue generating potential returns. 

Alternatively, you could use it to purchase an annuity – a form of insurance product that offers a guaranteed income for a set period of time.

You can also invest in a range of assets through your pension

Most pensions allow you to invest your contributions in a range of assets, which could offer competitive returns over time. 

You can typically choose from several different strategies to suit your tolerance for risk and investment time horizon. 

Over several decades, the compounding effect – essentially “growth on growth” – combined with tax relief and employer contributions, could make pensions a practical long-term savings method.

A financial planner could help you decide which option would best suit your needs

When comparing a LISA and a pension, the “right” decision for you will largely depend on your goals, income, and the stage of life you’re currently at. 

If you’re younger and want the flexibility to either purchase your first home or supplement your retirement fund, the government bonuses and tax-free growth of a LISA could benefit you. 

Conversely, if your main focus is retirement and you want to take advantage of the higher contribution limits and tax relief, a pension might be the wiser option.

To ensure that your approach fits your personal circumstances, it’s worth seeking bespoke advice from a financial planner. 

A financial planner could help you determine which option – or combination of options – best supports your retirement goals.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.

What’s the most important factor affecting the performance of your investments?

Your mind might jump to the ups and downs of the market, and they do have an effect. When share prices rise, so too will the value of your portfolio. However, the markets aren’t the starting point of a successful investment: your mindset is.

Your approach to investing could influence your success.

Short-term market movements don’t always reflect long-term trends

Tracking the markets can be enticing. They are constantly moving, with numerous factors influencing them. Headlines can make even slight adjustments seem dramatic. 

It can seem logical to focus on these movements, but doing so overlooks the long-term perspective that benefits most investors. When you look at the market returns over decades, you’ll see that the ups and downs smooth out.

Instead, you're left with a general upward trend. Even when markets have fallen sharply, such as during the Covid-19 pandemic, they have, historically, recovered these losses over a long-term time frame. 

Investors who focus on short-term market movements can find it more tempting to make adjustments to their portfolio as they try to time the market (buy low, sell high). As movements are impossible to consistently predict, they’re likely to make mistakes and could miss out on long-term gains as a result. 

So, if you shouldn’t be keeping an eagle eye on market movements, how should you approach investing? 

Calmness and patience are often essential for long-term investors 

An important first step to take is to define why you’re investing. Your reason might affect your investment time frame and the level of risk that’s appropriate for you. 

Then, you can create an investment portfolio that reflects your goals, risk profile, and financial circumstances. Your financial planner can help assess what’s right for you.

Next, far from keeping an eye on the markets section of the newspaper, it’s time to be patient. Trusting your investment strategy and taking a long-term approach could lead to better outcomes and stronger returns. 

It sounds simple, but embracing this mindset can be more difficult than you expect – it’s so easy to reach for your phone and check your portfolio’s performance or the news. While that might seem harmless, it can trigger an emotional response, from fear to excitement. These emotions mean you’re more tempted to change your investments and potentially miss out on long-term gains. 

If you struggle to focus on the bigger picture when investing, you might benefit from:

• Reducing media exposure 
• Setting clear dates when you’ll look at the performance of your portfolio
• Going back to your initial investment goal when you’re making a decision 
• Working with a financial planner who can highlight when short-term market movements might be affecting your emotions. 

These simple steps could help you develop some of the most important skills for successful investing: patience, discipline, and emotional control. Adopting a mindset that embraces these attributes could have a greater impact on your returns than short-term market movements. 

Taking a long-term approach doesn’t mean you never look at your investment portfolio. Regular reviews are still important. However, look at the performance over years, rather than days or weeks.

Similarly, there might be times when it’s appropriate to make adjustments to your portfolio due to changes in your circumstances or long-term trends, not because of the latest headline. 

Get in touch to talk about your investment strategy

If you’d like to work with us to review your current investment strategy or you’re interested in investing for the first time, please get in touch. We can help you create a portfolio that reflects your aspirations and circumstances. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

When you consider how bias might affect your financial decisions, it’s often the harmful outcomes that come to mind. However, there are ways you can leverage certain biases, including framing bias, to your advantage. 

Framing bias refers to the tendency for how information is presented to influence your perception or decisions.

For instance, if you read that 10% of a business’s customers are unsatisfied, you might assume it delivers poor service. However, if you switch this to say that 9 in 10 customers are satisfied, you’re more likely to have a positive view of the business.

The information presented is the same, but one option focuses on the positive, which may influence the decisions you make. 

It’s a type of bias that could affect your financial decisions.

If you’re looking at an investment opportunity and see that it has a 10% chance of falling in value, this could trigger a fearful response. Even though there’s a greater chance that the value will remain the same or rise, the framing of the information means you’re more likely to focus on the risks. As a result, you may be tempted to place your money elsewhere, even if it’s an investment that fits your overall strategy.

On the other hand, if you read that an investment has a 90% chance of delivering returns, you may focus on how it could help you reach long-term financial goals. 

3 practical ways you could reframe your financial decisions 

1. Focus on long-term performance during market volatility 

When investment markets are volatile, panic can set in. Rather than focusing on short-term falls in the value of your portfolio, you can reframe them more positively. 

This may involve looking at long-term performance. Although the value of your assets might have dipped when compared to a month earlier, over your full investment horizon, you could still be in a strong position.

Alternatively, you could reframe market volatility as an opportunity. It’s a chance to buy stocks at a lower price and possibly benefit from the bounce-back.

Reframing investment volatility in this way could help you look at the bigger picture and avoid decisions based on fear. 

2. Frame financial sacrifices as paying your future self

Securing the future you want often involves making financial sacrifices today. To enjoy a retirement that is filled with the things you love, you might need to reduce your disposable income to increase pension contributions.

Rather than looking at these decisions as a sacrifice, view them as a way of paying your future self. This mindset adjustment could make sticking to your long-term financial plan easier because you’re working towards a clear goal, though this may not be suitable for everyone. 

Similarly, you can reframe essential spending.

For example, your monthly premiums for income protection or life insurance may seem like an added household expense with little immediate benefit. Reframing this outlay as a way to insure your future can help you focus on the benefits financial protection offers. 

3. Review information from a positive perspective 

People often avoid financial decisions or certain options because they’re worried about the outcome or believe they lack the knowledge they need. 

A July 2025 poll conducted by YouGov found that just 1 in 3 Brits express a willingness to invest savings in stocks and shares outside of a pension. One of the key reasons for avoiding investing was that it’s “too risky”.

While investing does present some risks, the markets have historically delivered long-term returns and recovered from downturns. While investment returns cannot be guaranteed, people who avoid investing because of their worries could be missing a chance to increase their wealth and reach life goals.

For those who focus on potential losses, reframing the information to emphasise potential returns and what they could enable in your life might be helpful. 

Of course, a positive outlook needs to be realistic and, when investing, it’s important to be aware of the risks. A financial planner can help you establish what investment risks are appropriate for your circumstances. 

Get in touch

Working with a professional financial planner could help you assess your financial decisions and identify when bias might be influencing the outcome. We could help you frame information in a way that allows you to assess your options. Please get in touch if you’d like to arrange a meeting. 

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. 

Tax treatment depends on individual circumstances and may change in the future.