The purpose of an annuity is to convert your pension into a guaranteed income for the rest of your life.  The advantage of them is that they are simple and also provide a guaranteed level of income.

How they work

You use your pension fund to purchase the annuity.  You could be doing this with your existing provider or in fact using the open market to move to another provider if you are getting a better annuity rate (ie more income than your existing provider).  From this pension fund you can take your tax free lump sum (which is usually 25% of the value of the pension).  The remainder of the pension fund then purchases the annuity and then will provide you with an income for the rest of your life.

There are factors that determine what annuity rate (and therefore income) you will get.  These include:
  • Your health
  • Your lifestyle (such as if you smoke or drink)
  • What medication you are taking (if any)
  • Where you live
  • The value of the pension fund
You should never just take the annuity with your existing provider, as you could be losing out on hundreds if not thousands of pounds each and every year.  You should investigate the ‘open market option’.  This is your statutory right to be able to move your pension to another provider in order to get the highest level of income possible.

In many cases using the open market provides a higher level of income than your existing provider based on individuals in good health.  If you have health conditions or take medication then this could increase the income your are entitled to dramatically, therefore you should ensure that your health and lifestyle factors are taken into consideration when looking at the open market option.

Your choices

There are a number of choices you have when looking at annuities and you should ensure that you make the right choice for your situation as in many cases once these choices have been selected then you cannot change them at a later date.  These include:

A Level Or Escalating Annuity

This means that you have a choice of an income that will start at a higher level and remain the same for life.  Or an income that will start at a lower level but increase each year (such as by 3% per annum).


This is a form of death benefit and you can choose a 5 year or 10 year guarantee.  This means that for the first 5 or 10 years of the annuity if you pass away the income would continue in its fullest for that period of time.  The cost of this is taken by giving you a slightly lower income than if you did not select them.

Single Life Annuity

There is no additional cost for this.  It means that the annuity is on your life only, therefore if you die (apart from any guarantees selected) the income will stop when you die.

Joint Life Annuity or Spouses Pension

This means that you are including your spouse in your annuity.  The rates that can usually be selected are 50% or 100% of the income.  This means that if you die then the income would continue either in full or at half the original level.  The cost of a spouses pension is taken by giving you a lower income than that of a single life annuity.

It is clear that you should be careful what options you select as what is right for one situation is not necessarily right for another.  We would recommend that you do get various quotes in order to make a more informed choice.

"It was honest and transparent with sound advice given." -- Mrs L Thorne, Gillingham

"You make what appears at first to be complicated so that it is easier to understand." -- Mrs C Zentveld, Portsmouth

Who should consider an annuity?

  • Those who want a guaranteed level of income
  • Those who are taking income at a later age
  • Those who have health conditions
  • Those who have smaller pension funds
If you are considering an annuity, there are a number of things you should consider before deciding on which annuity to go for.  We suggest you find out the following:
  • What income will your existing pension provider give you?
  • What income can you get using the open market option?
  • Ensure that your health details are taken into consideration as you could be entitled to an enhanced rate
  • What other options are available (such as income drawdown)?
Once you know the above information you can make a clear decision.  However be careful where you get the information from.  Many websites and brokerages only provide a non advised level of service.  This means that they cannot give you any advice or opinion what so ever on your choices, further more they are not able to provide the full range of services as certain products such as drawdown are only able to be dealt with by fully qualified financial advisers who have that experience in the retirement market.  Not only that, in the majority of cases there is no additional costs for dealing with fully qualified advisers compared to that of non advised.

How To Find Out More Information

We provide a Free No Obligation Telephone Consult to talk through with you the pros and cons of income drawdown based on your specific set of circumstances.  This Free Consult will help you to understand:
  • The differences between drawdown & annuities
  • How the death benefits work with drawdown and annuities
  • The drawbacks of drawdown and annuities
  • How much income can you get from income drawdown compared ot annuities
  • The costs of each option
Our single objective with this Free consult is to help you understand your options better and there will be no obligation or pressure of any kind.

You will also receive a Free Report showing the pros and cons based on your specific set of circumstances.

Who Is This Consult For?

You will benefit from this Free consult if:
  • You want to understand your retirement options in greater detail
  • If you want your options to be explained in simple language
  • If you do not want any pressure
  • If you want to talk with someone that is independent and a specialist in the various retirement options
How To Book Your Free Consult

All you have to do is fill in the form below.  A specialist in retirement advice will then be in contact to discuss things with you in greater detail and help you to understand your options better:

Free Retirement Consultation

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Registered Office: Premier Financial Planning Ltd, Ladymead House, Pound Lane, Bishops Lydeard, Taunton, TA4 3AY Registered in England and Wales Number: 6697578 Telephone: 01722 717427
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Income Drawdown