Pension Annuity

1. Complete the online annuity planner, or call our dedicated support team

In order to provide your personalised quotations, you will need to provide us with a range of information including your contact details, the value of your pension fund(s), as well as answer some health and lifestyle questions.

These questions enable us to identify if you could be entitled to an enhanced annuity which can generate a higher income of up to 40%*. Even minor ‘medical conditions’ such as high blood pressure, high cholesterol levels or being a smoker could give you an increased annual income.

Retirement is the one time when your medical and lifestyle situation could actually improve your lifetime income.

2. Receive your quotes

Once you have provided us with your details, you will receive quotes from a range of annuity providers. The quotes are illustrated in a simple to understand table displaying the annual income you will receive from each provider, shown in order of highest income first.

We compare quotes from leading annuity providers, including Aviva, Canada Life, Hodge Lifetime, Just, Retirement Advantage and Scottish Widows.

3. Compare and choose an annuity

Compare the quotes you receive through the Age UK Annuity Service to the quote you’ve received from your existing provider.

If you have been quoted a better annuity rate from your existing provider, great. If using the Age UK Annuity Service can get you more, then even better. 

If you would prefer to receive some advice on your decision then HUB can put you in touch with an expert, which is likely to incur a fee.

4. Buying a guaranteed income for life

If you decide to accept one of the quotes you receive using the service, you can apply straightaway by clicking “Request application pack” online or asking your annuity coordinator to send you an application form to complete.

HUB will guide you through the information you’ll need to provide and will liaise with your pension provider to make sure you receive your retirement income promptly.

You could start receiving your retirement income in as little as two weeks from application.

Advantages

• You know exactly what what income you will receive for the rest of your life.
• You can usually take up to 25% of your pension pot as tax-free cash lump sum (now known as the Pension Commencement Lump Sum) before you purchase the annuity.
• You can consider an enhanced annuity which will take your health and lifestyle into account when determining the amount of income you will be paid.
• You have the security of knowing that you will always have an income for as long as you live.
• Depending on your personal circumstances, there are a number of options you may wish to include when you take out your annuity, including:
  1. Income for loved ones - providing for others, such as your spouse or dependents for once you have passed away.
  2. Value protection - allows you to protect a chosen percentage as a lump sum for your loved ones if you die without having received the full value of your pension fund.
  3. Protection against inflation - you can choose to increase your annuity income in line with inflation.
  4. Guarantee period - this ensures your annuity will be paid to your loved ones for the duration of the guarantee period, even if you die early.

Disadvantages

• Once you have secured your annuity you cannot change it, even if your personal circumstances change or inflation (the cost of living) rises steeply.
• If you die relatively soon after taking out the annuity, the money used to fund its purchase cannot be returned - even if you have only received a fraction back from the annuity provider as income payments. You can choose to protect against this happening but it will mean having a smaller income from the outset.
• If you haven't considered applying for an enhanced annuity, you might be losing out on income.
• The income you receive is dependent upon annuity rates at the time of purchase.
• By choosing to include annuity options, such as those listed in the advantages section, it will usually mean you receive a lower initial income.

What other options do I have to access my pension savings?

There are a number of options for how you can access your pension savings to generate a retirement income.

Your options include:

• Leaving it untouched (known as deferring).
• Using it to buy a guaranteed income for life (an annuity).
• Using it to provide a flexible retirement income (through a drawdown product).
• Take a series of cash lump sums.
• Take your whole pot as cash.
• A mix of the above. 

Whichever retirement income option you are considering, your first step should be to make the most of the free guidance to which you are entitled through Pension Wise (an impartial service backed by the Government).  They will help you to understand your options and how they work to give you a clearer understanding of what's right for you and to make you aware of any tax implications. For more information visit: www.pensionwise.gov.uk

Here are some of the most frequently asked questions and answers concerning annuities:

• Do I have to use all my pension to buy an annuity?
• Once I've bought my annuity, can I change it?
• What are the benefits of taking out an annuity sooner rather than later?
• What is the open market option?
• What is an "enhanced" annuity?
• Will my partner get any money from my annuity when I die?

Q. Do I have to use all my pension savings to buy an annuity?

A. No. You can choose to take up to 25% of your pension savings as a tax-free lump sum. If you'd like to access more than your tax-free lump sum, you can, however any amount you take above the initial 25% will be taxed at your marginal rate. To purchase your annuity, you would then use your remaining pension savings.  It's important to know that the more pension savings you use to buy your annuity, the more income you will recieve from it.

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Q. Once I've bought my annuity, can I change it?

 A. Once you've purchased your annuity and started receiving an income you can't make any changes. For example, if you haven't chosen to include any death benefits, or perhaps inflation protection, before you start receiving your annuity income and then decide you want to, you won't be able to add them.

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Q. What are the benefits of taking out an annuity sooner rather than later?

A. By taking out an annuity you will enjoy a guaranteed regular income for the rest of your life, that can enable you to plan with certainty. It also saves you from having to monitor the progress of your pension fund and make ongoing investment decisions. If you decide to delay purchasing an annuity (also known as 'deferring'), your pension savings will stay invested in a pension fund. We’d all love our investments to grow, however, investments can also fall in value so it’s important to be aware that the amount of money you will have to purchase your annuity could fall.

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Q. What is the open market option?

A. The ‘open market option’ entitles you to shop around the market for the most suitable annuity income at the point at which you decide to use your pension fund to buy an annuity. Using the open market option could secure you a higher income than the annuity offered by your pension provider and, if you have or have had health problems and qualify for an enhanced annuity, you could secure an even higher income.

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Q. What is an "enhanced" annuity?

A. Enhanced annuities are a guaranteed income for life. They are offered by certain specialist providers, providing an income boost to those with mild health problems, from high blood pressure and cholesterol to smokers for example, and others with more severe health or health related conditions such as cancer. They could pay an income which, depending on your medical condition, may be higher than a standard annuity.

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Q. Will my partner get any money from my annuity when I die?

A. A lifetime annuity pays you a regular income for the rest of your life but once you die your payments will  stop. However, you can choose to add options (listed in the advantages and disadvantages section above) to ensure a loved one continues to benefit from an income from your annuity after you have passed away.

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