Current as of 17 Feb 2026. Always verify current year rates.
Annuity (lifetime income) vs account-based pension: what’s the difference?
Short answer:
A lifetime income product (annuity) can provide predictable income for life, but usually with less flexibility and different access to lump sums. An account‑based pension is flexible and stays invested, but income isn’t guaranteed and balances can run down. Some retirees combine both to balance certainty and flexibility. The right fit depends on your goals, need for certainty, and appetite for complexity.
Key takeaways
Lifetime income can increase certainty, but reduces flexibility
Account‑based pensions are flexible, but income isn’t guaranteed
Liquidity (access to lump sums) differs between options
Complexity and fees can vary, so compare carefully
Consider how each interacts with your spending rule and risk tolerance
Why this matters
This is a classic trade‑off: certainty versus flexibility. Framing the decision around your must‑pay costs and your need for access to lump sums helps keep it practical and calmer.
Mini-plan (3-4 steps)
- Write down your essential spending that you’d like to ‘cover’ reliably.
- List expected lumpy costs where flexibility matters (health, home, travel).
- Read Moneysmart’s explainer on lifetime income streams and account-based options.
- If considering products, consider licensed advice before committing.
Related questions
Sources (so you can verify)
Disclaimer: Information provided is general in nature and does not constitute personal financial advice. You should consider seeking advice from a licensed financial planner before making any financial decisions.
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