You don't have to take out an annuity until you are 75. You can instead opt for an “unsecured pension”, which enables you to draw an income while leaving your pension invested in shares and other assets. An unsecured pension affords greater flexibility than an annuity in the sense that it enables you to choose – subject to an upper limit – how much income you take and when you take it. To find out more about your options please visit money made clear

No. You are normally able to take up to 25% of your pension fund as tax-free cash.

No. Annuities are only relevant to members of “money purchase” or “defined contribution” schemes. If you are a member of a “final salary” or “defined benefit” scheme your employer is responsible for ensuring that there is enough money available at the time you retire to pay your pension. Even members of “money purchase” or “defined contribution” schemes can take some or all of their pension as a cash lump sum instead of an annuity if the total value of all their pension funds is less than £15,000. Click here to find out more.

Many large insurance companies sell annuities and there are other specialist providers such as Just Retirement which sell annuities that are tailored to the needs of retirement customers. Just Retirement offers annuities which give higher rates to those who with health or healthy related conditions. But the best starting point when considering buying an annuity is to consult an IFA. to find an IFA local to you visit IFA Promotion. 

You do not actually have to use your pension fund to buy an annuity until you are aged 75, but by taking out an annuity you will enjoy a guaranteed regular income until you die that can enable you to plan with certainty and spare you from having to monitor the progress of your pension fund and make ongoing investment decisions.

Your pension options are fixed at outset and cannot be altered to take account of changes in personal circumstances.Your annuity income cannot be altered in value (except for standard increases from indexing payments). Hence there is a limited amount of flexibility and control of your payments. An annuity would represent poor value for money should you die early, depending on what death benefits you took out at the time of annuity purchase. The income you receive is dependent upon annuity rates at the time of purchase. There is no possibility of benefiting from future investment returns with a conventional annuity. 

The open market option entitles you to shop around the entire market for the most suitable annuity deal at the point at which you decide to use your pension fund to buy an annuity. Using the open market option can secure you a higher income than the annuity offered by your pension provider and, if you have health problems and qualify for an enhanced or impaired annuity, you could secure a much higher income still. For more information click here.

Enhanced annuities, offered by certain specialist providers, provide an income boost to those with mild health problems, to smokers and others with health or health related conditions. They could pay an income which is up to 40% higher than a standard annuity. An even higher income can be gained for those with more serious health problems. This can sometimes pay an income of over 60% higher than that paid by a standard annuity.

If you choose a standard single-life annuity your partner will receive nothing when you die, but there are three annuity options that enable you to pay slightly extra to provide for your partner - or other dependants.

• A joint-life annuity will pay some or all of your annuity income until the death of your surviving dependant.
• An annuity with a guarantee period will ensure that income payments continue for a period of up to 10 years from the start of the annuity if you die earlier.
• If you die before the age of 75, a value protected annuity will pay a lump sum of up to the original fund less any payments made before your death – subject to a 35% tax deduction. The level of your pension, guarantee and Value Protection are chosen at outset, and choosing any of these options would mean a lower initial income.

We have produced a number of customer guides about annuities and you can download them here. Other organisations such as the Financial Services Authority (FSA) also produce independently written information sheets and guides. To view the FSA’s Moneymadeclear website, click here. But the most comprehensive way of finding out about annuities and about the best options for you is to consult a financial adviser.

If you do not have an existing retirement planning adviser, IFA Promotion will be able to put you in touch with suitable IFAs in your area. You can contact it on 0800 085 3250 and it will provide you with a list of IFAs local to you.
Alternatively, use the ‘Find an IFA’ search on its website – www.unbiased.co.uk