Can you borrow against an annuity or use it as security?

Can you borrow against an annuity? In practice no: a pension annuity cannot be cashed in, and signing away its income is taxed as an unauthorised payment.

People ask because an annuity feels like an asset: a contract that keeps paying. But what you hold is a right to a stream of payments, set on the day you bought, and the rules treat giving up that right as a tax problem. This page sets out what the tax rules and the government have said, how offers of an "annuity loan" tend to work out, and the routes that exist if you need cash.

For free guidance on a pension not yet turned into income, Pension Wise appointments from MoneyHelper are, in its words, impartial and backed by government. Annuity holders short of cash can go over other sources of money with an FCA-authorised adviser, phoning free once prompted via the form on this page.

Can you use an annuity as security for a loan?

Not without running into the tax rules. An annuity pays the income agreed when you bought it; it is not a pot to dip into, and the rules below show why passing the payments to someone else for cash is a problem.

HMRC's Pensions Tax Manual shows how firmly the contract is fixed. For an annuity where entitlement arose before 6 April 2015, one of the conditions for it to count as a lifetime annuity was that it must "not be capable of assignment or surrender (except to give effect to a pension sharing order )." The manual lists different conditions for annuities where entitlement arose on or after 6 April 2015, but a separate surrender rule, described next, is not tied to either period.

The same manual also says: "Any other payment made by the contract will be an ‘unauthorised’ payment, and taxed accordingly." In other words, the contract may pay only the benefits the tax rules authorise, such as the annuity income and death benefits that meet HMRC's rules.

What happens if you sign over or give up the income

A separate page of the manual, on surrender of rights, deals with a member of a registered pension scheme who surrenders, or agrees to surrender, certain benefits. One of the rights it lists is "any rights to receive payments under a lifetime annuity or a dependants’, nominees’ or successors’ annuity purchased from an insurance company with sums or assets held for the purposes of the pension scheme". The consequence is stated flatly: "then an unauthorised member payment is deemed to have been made."

So an arrangement under which you give up the right to your annuity payments, even in return for cash, can create a tax charge instead of a loan. The manual values the deemed payment at what the right would have fetched had it instead been assigned at arm's length, ignoring any power to reduce it. The same page says an assignment can itself be treated as an unauthorised payment, and where it is, the surrender is not charged a second time. The tax on unauthorised payments is covered in what is pension liberation. Whether a particular pledge would count as surrendering or assigning the right depends on the arrangement itself, and an adviser can explain that point free if you use the form.

The plan to let people sell existing annuity income on a secondary market was dropped by HM Treasury on 18 October 2016; can I withdraw from an annuity covers that decision, the 30-day cancellation window and what providers say about cashing in.

Annuity loans, annuity-backed loans and "pension loan" offers

Searches such as "annuity based loan" and "annuity bank loan" bring up a mixture of things, and not all of them involve your annuity at all. A personal loan or mortgage is a separate product from the annuity, and whether a lender will lend, and on what terms, depends on its own checks. How your annuity income would feature in those checks is a fair question for the lender.

Offers that do ask for the annuity or the pension itself deserve more care. On its pension scams page (last updated 19 January 2026), in a section on early pension release, the FCA warns that "Offers to access your pension early may be called 'pension liberation' or a 'pension loan', as the scammers often claim you can borrow money from your pension fund." The warning signs are set out in pension scams, and why a pension scheme cannot lend to its own member without a tax charge is in can I borrow money against my pension.

Annuity or loan: what separates them

An annuity and a loan run in opposite directions. With an annuity you hand over a sum, usually from a pension, and an insurer pays you income; with a loan a lender hands you money and you repay it. Once bought, the money does not come back on request: according to MoneyHelper, a refund is possible only in the 30-day window that most annuities give for changing your mind, and not after it.

The tax rules quoted on this page concern annuities bought with pension money; a purchased life annuity bought with savings is a different contract, and purchased life annuity rates covers how those pay and are taxed. If you have not bought yet, the options at retirement are in defined contribution pension options at retirement, and is an annuity worth it weighs the trade-offs.

If you need cash and already hold an annuity

If debts are behind the question, the FCA says "If you’re worried about money and want to use your pension to repay debts, contact a free debt adviser first to find out what your options are."

Because the annuity itself cannot be turned into a lump sum, any route to cash lies elsewhere: other savings, a pension pot not yet used to buy an annuity, or borrowing that does not rely on the annuity. For the pension pot route, pension drawdown explains the way money is taken from a pot that is not an annuity. For homeowners, equity release explains how borrowing against a home works, what it costs and how it reduces what you leave.

Borrowing against an annuity: common questions

Can I use my annuity to buy a house?

The annuity itself cannot be turned into a lump sum for a deposit, for the reasons above. How a mortgage lender treats annuity income is for the lender to say; an adviser on a call-back can talk you through your wider position.

Can I borrow money from my retirement annuity?

Not from the contract itself: HMRC's manual says any payment from it other than the benefits the tax rules authorise is unauthorised and taxed accordingly. If yours is a pension plan still building up rather than an annuity already paying you, a loan from the scheme to you is an unauthorised payment too; borrowing against a pension explains why.

What if I have not bought the annuity yet?

Before purchase the money is still a pension pot with a choice of ways to take it. A free Pension Wise appointment can go through them with you, and how a pension annuity works is the place to start.

Talking to an adviser about your options

If you hold an annuity and need money, or someone has offered you cash against it, check before you sign anything. Pause here: the form on this page summons a no-cost call, where an FCA-authorised adviser, not the lender, weighs that offer against alternatives.