Pension and retirement options – annuities

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22 February 2018

Services:

Personal Tax Planning,

Wealth planning & Private client

Further to our blog on the main pension options available at retirement, we now look more closely at the next of these choices annuities, the pros and cons of this option and how it may impact on you.

What is a retirement annuity?

When you buy an annuity you exchange some or all of your pension for a fixed income for the rest of your life. You now don't have to buy an annuity when you retire - but they are still an good option for anyone looking for the security of a guaranteed income.

If you do buy an annuity, you don’t have to use your whole pension - you can use some of your fund for an annuity to cover living expenses and leave the rest invested to take later through drawdown or lump sum payments to suit you.

About annuities - the different types

There are various annuity options at retirement which include :

Conventional annuities – give a guaranteed income that stays the same for the rest of your life, regardless of any changes to your health or the financial markets
Enhanced annuities – level of income offered at the outset depends on your health and lifestyle choices (for example if you are a smoker) and will stay the same for the rest of your life
Variable annuities – a guaranteed income that can go up depending on the performance of a selected investment fund
Fixed-term annuities – income is guaranteed for a fixed period, after which you or your beneficiaries receive a pre-agreed lump sum payment
Investment-linked annuities – payments can increase or decrease in line with the performance of your underlying pension investments, usually with a guaranteed minimum level of income

Should you purchase an annuity for retirement?

There are tax implications and rules to follow so each case must be addressed individually. Most providers will offer you a number of optional features for personalising your annuity. It is important to take advice and compare annuity rates from different providers to find the provider offering the most income for your own circumstances. Once you have made a purchase you cannot usually change your mind.

Contact Us

We recommend our clients to Tilney, one of the UK’s leading private client investment and wealth management company who provide top quality, solid and practical pensions advice.

For pension advice, tax on pensions, auto enrolment, defined contribution, defined benefits, transfer values or any other advice please contact Charles Coade direct on 0113 224 5544 or email charles.coade@tilney.co.uk or via our Leeds office on 0113 398 1100 or email leeds@hwca.com