Frequently asked questions for annuities
Click on the links below to find the answers to each question.
Do I need to buy my annuity from my current provider?
No. You don’t have to buy your annuity from your current pension provider. It may benefit you to shop around (commonly referred to as an Open Market Option (OMO)) to get the best rate available with the help of a financial adviser.
How can I be sure I’m choosing the right annuity?
Converting your pension fund into a regular income is one of the most important financial decisions you’ll make in your life, and an annuity is just one of the options available. You don’t have to make a choice until you’re coming up to your chosen pension age; however it’s useful to understand your options. It’s particularly important to understand that, once you buy an annuity, its terms usually can’t be changed.
Making the right choice depends on a number of factors, including whether you have a spouse, civil partner or dependants, and your health. Remember, you don’t have to decide until you are approaching the age you want to start taking your retirement benefits. You should certainly consider consulting a financial adviser.
Can I choose when to buy my annuity?
Currently, you can decide to buy an annuity from age 55, even if you’re still working.
You need to review your options and contact us before your 75th birthday. Under the terms of our policies we require you to choose a retirement option by age 75. That way you can take advantage of the full range of available options and don’t miss out on taking your pension in the way that best suits your needs.
If we don’t hear from you before your 75th birthday, we will automatically buy an annuity for you in accordance with the policy terms. This will give you a regular and guaranteed income for life but you will lose the opportunity to take tax-free cash or an alternative option which may better suit your needs. By missing out on the opportunity to shop around you might end up with a lower income as a better deal might be available elsewhere.
If I want to buy a Scottish Widows annuity what is the minimum and maximum age at which I can apply?
The minimum and maximum ages at which you are eligible to apply for a Scottish Widows annuity are between 55 and 75 years of age. You can buy an annuity before age 55 if you are retiring due to ill-health. If you are including a dependant on your application then they need to be aged between 50 and 75 years of age.
If I have a smaller pension pot can I still have a Scottish Widows annuity?
If you have a small pension pot, and have decided that an annuity is your best option, the minimum amounts need to apply (before payment of tax-free cash) are -
- for an Enhanced Annuity, £5,000
- for a Standard Annuity, there is no minimum if you are an existing pension plan customer, otherwise the minimum is £10,000.
How is it taxed?
We deduct income tax from your annuity payments on your behalf. Your Tax Office sends us your tax code number, and tells us how much tax to deduct (taking into account your personal allowances). At the end of the tax year you’ll get a P60 showing your annuity income and the tax taken off. You should keep this in case you have to fill in a tax return or need to claim tax back from HM Revenue & Customs. Tax rules can change. The tax deducted will depend on your personal circumstances which may change.
What happens if I die?
Normally, your income will stop when you die.
However, if you choose for your income to be paid for a guaranteed period and you die before the guaranteed period has ended, we'll pay the remaining payments to your estate. If you die before age 75, any remaining instalments will be paid free of income tax. If you die after age 75, instalments will be paid net of income tax to your estate.
If you've chosen a dependant's income and the dependant is still alive when you die, we will start to pay their income in line with your annuity conditions. If you die before age 75, any income paid to a dependant will be paid free of income tax. If death occurs after age 75, income will be paid to your dependant net of income tax at their marginal rate.
The total amount of income paid to you and any dependant may be less than the amount used to buy the annuity.
How do you check my health and lifestyle?
We don’t ask you to undergo a medical examination when you are applying for your Enhanced Annuity. However we may, within six months of your annuity being set up, check the health and lifestyle information you supplied in your application. To do this we may ask your doctor to complete a report.
Dependent on the results from the above we may need to gather further evidence. For example, if you stated you are a smoker, we may ask you to undergo a simple test to confirm your smoker status.
If your answers to the personal, medical and lifestyle questions are inaccurate or incomplete we may reduce your income or at worst cancel your policy.
If I don't have any qualifying medical condition or lifestyle factors, are there any other retirement income options open to me?
From 6 April 2015, the Government introduced pension freedoms, this means in most cases from age 55 you now have a wider choice of options at retirement. See our retirement planning site for more information regarding these options.
If you are unsure what to do next, or what is the best option for you, we recommend you speak to a financial adviser or Pension Wise to help you with these important decisions.
Have we answered all your questions?
We hope you have found this summary of frequently asked questions helpful. If you have any further questions please contact us.