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Retirement Planning and Wealth Management in Cheadle, Cheshire

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What is an Annuity?

Annuities convert your pension savings into an income.

Be careful, any annuity purchased by pension funds or drawdown income will be taxed as income.

How do Annuities work?

An annuity is a financial product that enables you to convert your pension savings into a monthly or yearly retirement income for you to live on.

The amount you will get depends on factors such as how old you are; the younger you are when you retire, the less you get each year, and whether you want your annuity to pay an income to your spouse or partner when you die.

It's worth thinking about talking to a financial adviser about the best type of annuity and which company will pay you the highest income.

Open Market Option

If you have a pension fund, you should be told that as an alternative to buying an annuity from the company you have saved with, you have the option to take the fund to another company and buy it from them.

NB: Some older pension plans may have high levels of guaranteed annuity income “built in” to them and it is important to assess whether or not these are available to ensure they are not lost if the plan is moved to another company.

Annuity Providers

Annuity providers will be allowed to vary the amount of income they pay. You may wish to take less to begin with and larger sums later on. New rules will allow you to take a lump sum from an annuity, provided you agree to this when you buy one.

Your family may be allowed to be paid from your pension after you die if you include a guarantee period.

Different Types of Annuity

There are many different types of Annuity. Find out More »

The main types of annuity include:

  • Lifetime or Fixed Term
  • Single Life or Joint Life
  • Enhanced Annuities
  • Fixed income, Escalating Income or Investment-Linked Income

Pension Freedoms

Since April 2015 you will have been able to withdraw as much of the money you want to that you've saved into your pension, once you reach 55. You can also access your defined contribution (DC) pension (if you have one) as you choose from the point of retirement and not have to purchase an annuity.

Although the government has confirmed plans to increase the minimum pension age from 55 to 57 from 2028.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.