Annuities – what are they and why do I need to know?


It’s a fact that people are living longer and may well need their income to last for 25-30 years in retirement. The majority of the population would like to have a known income in retirement so that they can budget accordingly.  In my experience clients also like the certainty that this money will continue to be paid for their lifetime, maybe even after their death to a spouse.  One of the best products for someone reaching retirement who would like the certainty is an Annuity.

An Annuity is a product that uses the money in your pension fund to provide you with a tax free lump sum of up to 25% of your accrued pot. The remainder of the fund  is used to buy an income for life. This may be taxable dependent on an  individual’s circumstances. Why do I need to know this, I hear you cry? Well, there are a lot of options that you can choose for the remainder of the fund and it is important that you seek Independent Financial Advice.  By talking to a professional, you can make sure your money gives you the highest level of income for your needs; do you want a single or joint life? Do you want to build in any guarantees or percentage increases? How often do you want the income to be paid?

By just keeping with your existing pension provider you could be potentially losing out on an increased income in retirement and settling for a product that does not suit your needs!

I helped a client recently who had a Personal Pension. She came to me to ask if I could better the amount of income in retirement her pension provider had offered. By talking through what was important to her and finding out what other income she was receiving I managed to get her an increase in her income just by tailoring the annuity to her needs and looking at alternative companies.

You can also potentially make your income higher by declaring your health, lifestyle details and postcode! Why would this matter I hear you say? Well more and more people are benefiting from choosing an Enhanced or Impaired Life Annuity. This is when the Annuity provider  looks at your medical history, where you live and even the type of job you used to do .This can result in you being offered a higher income if you meet their criteria.

There are so many options to choose from and once the decision has been made you cannot change it. This is why you should take the time and talk to an Independent Financial Adviser.  We can advise you to make sure that the type of Annuity you choose is right for your circumstances and takes in to account any other income you may receive.

If you would like to discuss your options please do give me a call on 0115 977 1155 or email