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This post was originally published on 24/01/19 - any information is correct as of the date of publish. For the most up to date information speak to one of our retirement team on 0800 6899 335 or contact us.

Annuity Comparison

Annuity Comparison

You have the flexibility to do a number of things with your pension, annuities are retirement products which provide an income using all or some of your pension pot. The world of annuities can seem daunting and the various options can often leave us wondering what the best option will be, this is where an annuity comparison can be really useful. Working out the right annuity for you is made a lot easier with the help of an adviser, so we strongly recommend getting advice from one of our experts before you make any set-in-stone decisions.

What is an Annuity?

Before you start weighing up your options, it’s important that you are absolutely clear on the basics. An annuity provides you with an income during your retirement and in order for this to happen, you will put your pension pot in the hands of your chosen provider. You will receive income for the rest of your life, or for the time period that you request from your provider.

Annuity Comparison

The main types of annuity are lifetime annuity, invested annuity and fixed term annuity.

One of the more common forms of annuity is a lifetime annuity. This is where your income is fixed and in place for the entire duration of your life. With a lifetime annuity you take your pension pot and turn it into regular payments for the rest of your life. These payments continue even if the amount you receive exceeds the original pot.

A lifetime annuity is a good option if you would like to know exactly how much income you will be receiving each month. Once you take a lifetime annuity, you can’t change your mind, get access to your pension pot or benefit from any investment growth.

Because a lifetime annuity provides an income for life, how much income you get depends on your health and where you live, as well as the size of your pension pot. If you have certain medical conditions, or smoke, you may find your income increases, this is known as an enhanced annuity.

If however, you don’t feel the need to know the exact amount you will receive, then you may want to consider an invested annuity. Unlike with a lifetime annuity, the amount you receive can go up or down, so depending on the performance of the markets your annuity is invested in you could receive more or less than you would with a lifetime annuity. There is normally a guaranteed minimum income, but this may be lower than you are prepared to risk.

If the thought of investment risk fills you with a sense of discomfort, but you don’t want commit to a lifetime annuity, then you may want to consider a fixed term annuity.

The income you receive will be fixed, but you can decide how long you will receive it for (this can be anywhere above three years). At the end of the fixed period you get a guaranteed maturity amount, and you can reinvest that in another annuity, take it as cash or a combination of the two. Fixed term annuities give you options – you’re not locked into them for life as you are with a lifetime annuity, but they’re not for everyone – you need to review your options at the end of the fixed term, and the higher the income you chose the lower the maturity amount will be at the end of the fixed term.

Get in touch

An annuity comparison can be extremely useful when you are deciding what to do with your pension pot, as the various types that are available can often leave people wondering which one is best for them. If you would like any further advice on annuity comparison or annuities in general, then do not hesitate to give one of our expert advisers a call.