What is a Pension Annuity?
A pension annuity is a product that pays you a regular income for the rest of your life, no matter how long you live.
When you retire, one of the most important decisions you'll need to make is how to secure enough income to live out the rest of your life in comfort.
One option is to convert the pension pot you've built up into a regular income. You can do this by buying what is called a pension annuity or an 'annuity'.
With a pension annuity, you'll know exactly how much you're getting, come rain or shine.
An income for lifeNo matter how long your retirement, the income from your Pension Annuity will provide an income for life. It's worry-free.
A fixed or increasing income
You can choose a fixed income that always stays the same or set your income to increase every year to help you keep up with inflation. It can increase by a set percentage or in line with the Retail Price Index (RPI). It’s worth remembering that the higher the increase you choose, the lower your starting income will be.
You can choose monthly or yearly payments and you can select to be paid at the start (in advance) or at the end (in arrears) of the month or year you’ve selected.
Options to support your dependants
You can continue to have your payments paid to a loved one after you die by choosing either 50%, 67% or 100% of your income.
Guaranteed minimum payment period
You can guarantee to have your income paid for a certain amount of time – up to 30 years – once your annuity starts. If you die during this time, we’ll continue to pay your income to anyone you choose until the end of this period.
Choose to protect all or part of the amount used to buy your annuity.
When you die we'll pay a lump sum for the amount protected, minus any income payments already made. You can protect 25%, 50%, 75% or 100% of the original amount used to buy your annuity.
Full details on these features are in the Key Features document
The options you choose will affect the amount of income you receive.
Am I eligible for an annuity?
You must be aged 55 or over and have at least £5,000 to buy an annuity from your pension pot or drawdown plan after you’ve taken your tax-free cash.
I want an annuity income for life
If you value certainty that your income will last you throughout later life, this product may be for you.
I need to support my dependant(s)
If you want to pass some income to a loved one when you die, this product may be for you.
I want security from risks
Your income is guaranteed and is not affected by the performance of the investment markets or economy. It is guaranteed for life.
I have some health risks
If you have any medical conditions or lifestyle risks then you could get a higher income, with an ‘enhanced annuity’. When getting a quote online there is a section to capture these details. This also applies to your partner and could mean you receive a higher income.
Once agreed, it can't be changed
You'll need to be certain of the choices you make - there's no going back once the cancellation period ends and your Pension Annuity has started.
No cash-in value
The Pension Annuity can’t be cashed in or surrendered.
Your income is taxable
Income above your personal allowance is taxable. It may also affect any means-tested benefits you might receive. The amount of tax you pay on income from the plan will depend on your circumstances, and may change in the future.
You may get back less than you paid
Depending on how long you live and the options you choose, you may receive less in income payments than the amount of the pension pot you used to buy the Pension Annuity.
Enhanced annuities: Health details matter
When providing your information it’s important to share accurate personal health information with us, as this may help provide you with a higher income. We may ask for a report from your doctor to confirm information you've given us. Your income may be changed if we find the report doesn't match your application.
When you purchase an annuity with us, we aim to make the process simple, clear and jargon free. It can take as little as 15 minutes to get a personalised quote with us. You can save your quotes and come back later once you've shopped around. You can also complete your application online.
Here’s a summary of the process you’ll follow if you quote and apply for our annuity online.
Pension Wise free guidance appointment
Pension Wise is a government service from MoneyHelper that offers free impartial pension guidance. Available if you're 50 or over, you should consider having a free Pension Wise appointment, before you decide how to access your pension.
Before you start
We’ll run through some questions and considerations to make sure you’re ready to get a quote online.
About you and your pension pot
We’ll ask some details about you and about any pensions you’d like to use to get a quote. We’ll also ask if you’d like to include your partner on any quotes.
Choosing a guaranteed income product
As well as getting a quote for our Pension Annuity, you can also quote for our Fixed Term and Cash-Out Retirement Plans. You’ll be able to get multiple quotes on different products to see how the different options affect your level of income.
Health and lifestyle (Enhanced Annuity)
If you chose to get a quote for our Pension Annuity we’ll ask you about your health and lifestyle. If you have a health or lifestyle condition, we might be able to pay you a higher income (known as an enhanced annuity).
Get multiple quotes
You'll be able to select different options to see what income you could get and create multiple quotes to compare what these look like. Unless we tell you otherwise, the quote you choose is guaranteed for 40 days.
Compare annuity incomes
We can tell you if our Pension Annuity is the best quote available, or if you could get a higher income by shopping around, by carrying out a confidential and anonymous market comparison for you. If we find better deals available for you, you also have the option of seeing who is offering this by visiting our partner website Annuity Ready.
It's important to shop around and get as much guidance and advice as you need before you make any decisions.
Buying an annuity
When you’re ready you can apply online for the product using the guaranteed quote you saved previously.