What is an annuity?

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An annuity is a long-term investment made using your pension pot, which provides a regular income from the proceeds.

Annuities can be for a fixed term or for the rest of your life. Annuity planning can help you decide how long you want to make regular payments last – and how often you get them.

Types of annuities services

There are several types of annuity product available. The one that suits you may depend on different factors including:

  • The value of your investment(s)
  • Chosen level of regular income.
  • Your lifestyle and health.

Some products carry more risk than others, so it’s worth discussing with a wealth adviser to find the right type for you before investing in an annuity.

Annuity options

There are many different types of annuity products, catering to different needs.

Many people may want to receive a regular income for the rest of their life, while others may choose to access a larger income for a shorter period.

You may also be looking to secure your family’s financial future and want to ensure they receive regular payments from an annuity once you’ve passed on.

Types of annuity products

Lifetime annuity

A lifetime annuity plan provides regular payments for the rest of your life. The amount of these payments depends upon when you purchase the annuity. 

Enhanced annuities

Some providers offer lifetime annuities that take your health and history into account and pay a higher rate to customers who meet specific criteria.

If you’ve ever smoked, are overweight or spent a lot of your working life in hazardous environments, you may be offered larger regular payments based on perceived risk to life expectancy.

Other types of annuity can be discussed with your wealth advisor.

Escalation

Standard annuities provide a fixed monthly income, but this means the spending power of your pension could fall over time because of inflation.

An escalating annuity increases the amount you receive by the rate of inflation on the anniversary of your taking the annuity out. Because the income increases over time, you generally have to pay more for this type of annuity or accept a lower starting value.

Joint annuity

You can nominate a member of your family – such as a spouse or dependant – to continue to receive a portion of the income from your annuity once you pass away.

Along with the duration and regularity of your payments, knowing how you want to receive payments from your annuity can help an adviser recommend the most suitable type.

Want to learn more about pensions?

Visit our pensions page and find out how expert advice could help you. 

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Your Pension

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