Annuity Comparison Service
What is an annuity?
An annuity is a secure, regular income which you purchase from an insurance company using your pension fund. The goal of an annuity is to provide a steady stream of income during retirement.
When you retire, up to 25% of your total pension fund can be taken as a tax free lump sum. The remainder can then be converted into an annuity which will pay you a taxable income. Most pension schemes will allow you to purchase an annuity from age 55 onwards.
Consider your annuity options
When choosing your annuity you should consider the following;
- Would you like the income to be paid to your spouse/partner in the event of your death
- Would you like your income to increase each year
- When and how frequently you would like the payments
- How is your health
There are various types of annuities; level, escalating, single-life, joint-life, investment-linked, variable or flexible, fixed term and enhanced annuities. They all offer a range of different income options to suit your needs. It’s important to choose the right kind of annuity because once you’ve bought it you can’t change your mind and switch to another.
After deciding what level of income you need, you should shop around and compare rates. This means you don’t have to take the pension offered to you by your current provider, but can take your fund to another provider to get a higher rate. This is called an ‘open market option’ (OMO). Shopping around can significantly increase your retirement income and give you access to a wider range of products. If you suffer from ill health you could be eligible for an enhanced or impaired annuity.
Why it’s important to get advice
Buying an annuity is a big decision, so seeking help from an independent financial adviser is a good idea.
At Rees Astley we can help guide you through this process. We would contact your current pension provider to find out what they can offer you. We would then research the whole of the market place and compare what you could get with another provider. Finally, we would compile our findings and recommend a product to suit your needs.
Are there alternatives to an annuity?
You do have other choices in addition to buying an annuity. You can secure a retirement income from your pension fund via a variety of different solutions. There may be something more appropriate than an annuity. Please refer to the section on ‘retirement options’ or contact us for further information.
Financial Services Office
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