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What is a Pension Annuity?

A Pension annuity is where you buy an insurance agreement that will pay you a set, regular payment for a period of time. An annuity can be purchased with part or all your pension pot, and before pension freedoms in April 2015, was the main way to use your pension funds for income.

Although not as popular currently compared with pension drawdown, many people consider an annuity as a way to cover essential bills. They like the security an annuity gives them.

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Types of Pension annuity

Lifetime Annuity

Purchasing a Lifetime Annuity will pay you an income for life, and potentially could pay a spouse or nominated beneficiary an income for life after you die. There are different types of Lifetime Annuities including a basic lifetime annuity, enhanced lifetime annuity (if you have a medical or lifestyle factors) and an investment-linked annuity.

Fixed-term Annuity

A fixed-term annuity will pay a regular income for a set period, usually over five to ten years. After that, you could get a maturity payout that you could use to purchase another retirement product.

Things you need to consider when buying a pension annuity

Buying a Pension Annuity is an important choice, and we’d always recommend speaking with an independent adviser first before making any decision. Once your annuity is purchased, your money is locked in with the insurance provider, and normally irreversible. You should consider the below questions.

How much money do you want to receive?

Working out how much money you will need in retirement can be difficult. Still, as an annuity is a fixed income product, it’s essential to make accurate predictions if you are using all your pension pot.

The length of the annuity

Do you need a fixed income for a shorter period to cover off your immediate debt payments? These could include your mortgage, credit card or car loan. Are you looking for a set income for the rest of your life?

Do you have any lifestyle or medical issues?

Any type of medical condition or lifestyle choices could affect the amount of income you could receive. Annuity providers can offer enhanced annuity rates to people with underlining medical conditions or lifestyle choices they deem at risk.

Do you have a spouse or financial dependent?

With an annuity policy, should you pass away, you may be able to nominate a spouse or financial dependent to receive your annuity in your absence. If this is important, it could affect the purchase and type of annuity.

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We care about your life after retirement. Our pension specialists will offer you efficient, unbiased and a client-focused pension advice service.

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Complete our short form or call 0161 413 7051. Our team will then discuss your enquiry to get a better understanding of your situation.

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As soon as you give us authority to work on your behalf, our team will get started analysing your pensions to produce an in-depth report and assess against the market.

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Your financial adviser will deliver their assessment and ensure you fully understand the advice given. Now you will be able to make informed decisions about your future.

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We have the answers.

Have a look over our frequently asked questions, and if you can’t find what you’re looking for simply get in touch with our friendly team who are here to answer any questions you might have.

Can I transfer my annuity to another provider?

No, it is not normally possible to transfer your annuity to another provider. Purchasing an annuity is a non-reversible purchase, so needs careful consideration.

Can an Annuity be cashed in?

In most cases, it is not possible to cash in your annuity. If your annuity is of low value, your annuity provider may agree to give you a cash settlement.

Is Pension Annuity income taxable?

The first 25% withdrawn from your pension fund is tax-free. Any annuity payments after that, you pay income tax, just like you have done on your salary.

Tax treatment depends on the individual circumstances of each client and maybe subject to change in future.

What are Pension Annuity Rates?

Pension Annuity rates are the agreed amount of money annuity providers pay out to you, as per the annuity contract you have purchased.

What is an enhanced Annuity?

An enhanced annuity is where your annuity provider agrees to enhance the amount of income you will receive due to lifestyle choices or/and ill health. This enhanced payment is agreed before you purchase your annuity contract and cannot be changed. When purchasing an annuity, it is always recommended to divulge any medical or health issues.

What is a life-time annuity?

A Life-time Annuity is a retirement income product that you buy with your all or part of your pension pot. The insurance product will guarantee an income for life.