Annuities

What are annuities?

An annuity pays a guaranteed regular income to you for the rest of your life. The money to purchase an annuity will usually come from the pension fund which you have built up with money paid in by you and your employer over your working life.

When you reach retirement there are two main ways in which you can receive an income from your pension fund:

• by purchasing an annuity which pays a guaranteed regular income for life, or
• taking an 'unsecured pension' which allows you to draw an income whilst leaving your pension fund invested in shares and other assets.

However, once you reach the age of 75, you must normally use your pension fund to buy an annuity even if you opted not to take one immediately or invested your pension fund in an unsecured pension to start with.

You should always ensure that you exercise your right to shop around for the best deal on your annuity by using the Open Market Option and also to have your health and lifestyle taken into account, as this can often result in a significant boost to the income you will receive for the rest of your life.

As everyone’s circumstances are different, and before you make any decisions, we strongly encourage you to seek personal advice from an independent financial adviser (IFA).