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Annuities

  1. Overview
  2. Standard Annuity
  3. Enhanced Annuity
  4. FAQs
  5. What to do next

Standard Annuity in detail

This is the simplest kind of retirement income. It provides a guaranteed income for life.

It is easy to compare annuity providers (you don't have to buy your annuity from your pension provider). The income you will receive is largely determined by your age and interest rates at the time of purchase. You can compare what you would get in exchange for your pension fund from different providers.

Features

You can choose a type of income that suits you.

  • The income can be for a fixed amount until you die, or increase at a fixed rate each year, or vary each year in line with the Retail Prices Index (RPI) so if RPI is negative, your income could go down as well as up.
  • You will normally be able to take a tax-free cash sum of up to 25% of the value of your existing pension fund in exchange for a smaller taxable income.

    However, if you've already taken retirement benefits from that fund, such as a tax-free cash sum, you won't be able to take a cash sum from this policy.
  • You can choose to have monthly, quarterly, half-yearly or yearly income payments which can be made:
    • in advance, where the first payment will be made as soon as possible after your policy has been set up, or
    • in arrears, so, for example, if you choose monthly payments the first payment will be one month after your policy has been set up.
  • You can choose to have your income paid for a minimum period of time (5 or 10 years) also known as a guaranteed period. If you die during that period your income will continue to be paid until the end of the period.
  • You can choose to have a dependant's income paid to your surviving husband, wife, registered civil partner or other dependant after you die.
  • Regular payments will be made direct to your bank or building society through the Bank Automated Clearing Services Ltd. (BACS) system.

Risks

  • Once set up, you can't cash in your plan or change the basis of your income, even if your circumstances change.
  • If you choose an income that doesn’t increase, or increases at a rate lower than future RPI, inflation could reduce what you can buy with it.
  • If you choose an income that is linked to RPI it will vary in line with prices, and in the event of RPI being negative, it could go down.
  • If you transfer from another plan any guaranteed benefits associated with this would be lost on transfer.
  • When you die, your income will normally stop. The amount of income paid to you and any dependant may be less than the amount used to buy the annuity.
  • Before committing to buying an annuity, you should consider all of the pension options that may be available to you, such as taking a pension encashment or moving to an income drawdown plan. For more details of all your options at retirement, speak to a financial adviser, or see our "Retirement Planning" website.

Charges

  • Any costs for advice or services from a financial adviser can be paid to them from your plan via an adviser payment.
  • Our charges are allowed for in the calculation of your income.

Need further information?

See our FAQs or contact us.

Enhanced Annuity