What is an annuity?
Buy a Guaranteed Lifetime Income with your pension fund. Take away the risk of running out of income in retirement or having to make investment decisions. An annuity income provides certainty of income for the rest of your life!
Many Options
Tailor your annuity to suit you. Fixed or inflation-linked income. Single or Spousal Benefits. Choose your frequency of income payments and much more..
Up to 25% tax free
You can take up to 25% of your pension as tax-free cash when you set up an annuity
Pass on unused funds
A little unknown option allows you to pass on any unused fund if you were to die early
Annuities offer security for those who don’t wish to keep their money invested or don’t like uncertainty or risk. Buying an annuity is a one-time action that can’t be reversed, so you need to ensure this is the right option for you at retirement. You amount of income you’re offered is based on your age, health and the size of your pension. Shopping around for the best annuity income is essential to secure the maximum income.
How Annuities work
Discover how pension annuities work to help you understand if they’re right for you – or speak to one of our retirement advisers who will listen to your needs and advise if this is the best option for you
Using your tax-free allowance
At the outset, you can decide to take up to 25% of your pension annuity as a tax-free lump sum.
This is a one-time choice. If you don’t take tax-free cash at the outset, you can buy more guaranteed lifetime income from your annuity meaning a higher annual pension.
However, you can’t change your mind later and take the tax-free cash after the annuity has started.
Choosing your annuity features
You have the ability to tailor your annuity income to suit your needs.
You can choose to take your income as an annual lump sum or regular monthly income. Choose to increase the income each year to keep pace with the cost of living or keep it at a fixed level each year.
If you have a spouse or partner, you can ensure there is an income left if you were to predecease them. It’s your retirement income, make sure it’s tailored to your requirement.
Use as Part of a Retirement Strategy
Annuities are often thought of as an all-or-nothing retirement solution. Annuities, however, can be bought with just some of your pension also. For example, if you could secure a guaranteed annuity income which covered your household bills, you could use the rest of your pension to invest in pension drawdown. You would then have the best of both worlds. You’d have the security of knowing that whatever happened to the stock market, you’d have enough to cover your essential expenditure but could also enjoy access to a flexible income pot, which had the chance to growth through pension drawdown.
Fixed Term Annuities
If you don’t like the investment risk of drawdown but don’t want to commit to an annuity for the rest of your life a Fixed Term Annuity might be the solution.
- A fixed term annuity is a type of annuity contract that provides guaranteed income payments for a specific period of time. Unlike a lifetime annuity, which provides income payments for the duration of the your life, a fixed term annuity provides income for a fixed number of years, between 3 and 25.
- Fixed term annuities are often used as a way to bridge the gap between early retirement and state pension benefits. This allows you to reassess your plans when your government pension payments start.
- They can also be used to provide a guaranteed source of income for a specific period of time, such as to cover the cost of a child’s education or to ensure your pension pot and income is guaranteed during periods of market volatility.
- Fixed Term Annuity rates are based on deposit interest rates and so when interest rates rise, so does the return offered at the outset. As a result of the interest rate rises of 2022, Fixed Term Annuities are firmly back as a viable retirement option.
Enhanced Annuities?
One of the main advantages of shopping around for an annuity is they take into consideration your medical history and circumstances.
Health
As we become older, visits to the doctor become more frequent. Enhanced annuities are designed to provide increased financial security for individuals who are expected to have a shorter lifespan due to medical conditions or lifestyle factors. For example, an individual who is a heavy smoker or has a serious medical condition such as diabetes or heart disease may be eligible for an enhanced annuity.
Increased Income
The income payments from an enhanced annuity are typically higher than those provided by a standard annuity, which can provide additional income and financial security for individuals with medical conditions or lifestyle factors that are likely to affect their longevity.
Not all annuity providers offer enhanced annuities, and the availability of these products may vary depending on the individual’s medical condition and other factors. Certain providers specialise in certain medical conditions and therefore offer more income.
Other ways to use your money
If you’re not sure if income drawdown is right for you, take a look at other options for taking money from your pension once you’re retired. You can see more and compare your options here.
Pension annuity
Know exactly how much money you’ll get with our annuity that gives you a guaranteed income for the rest of your life.
Mix and match your retirement options
Choosing a few retirement options (rather than just one) could help you get the retirement lifestyle you’re after.
Taking all your pension in cash
See the impact of withdrawing your pension money as one lump sum – and what you can do instead.
Leave your money where it is for now
Not touching your money right away could make a difference to the size of your pension pot.
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