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Common Enquiries - Annuities
An annuity is an income paid for the rest of your life using the pension fund you have built up whilst working.
A pension annuity is available to you if you have saved into any of the following types of pension plan: money purchase occupational scheme, personal pension plan, stakeholder pension plan, retirement annuity contract, AVC or freestanding AVC, Section 32 Buyout policy or unsecured pension (income drawdown plan).
Annuity rates vary and the factors you need to take into account are the amount in your pension fund, your age, sex and provisions you wish to make for dependants. You also need to consider if you wish to receive a fixed or increasing income and any guarantees for your income when you die.
Do I need to have a medical?
If you are a smoker or suffer from certain medical conditions you may be eligible for a higher rate due to a shortened life expectancy. If you apply for an enhanced rate on your annuity, sometimes referred to as an Impaired Life Annuity, you will need to fill in a Medical Evidence Questionnaire. Normally you will not need to have a medical as the insurance company providing your annuity will contact your doctor for any information they may need.
How do I qualify for enhanced rates?
You do not have to be seriously ill to qualify for an enhanced annuity rate - if you think you may be eligible take a look at the list of conditions and ensure you complete a medical evidence questionnaire when you apply for your personalised quotation.
Where is my money invested?
When you purchase a conventional annuity you give up your capital (i.e. the value of your pension fund) for a promise of an income for the rest of your life. To ensure the annuity provider can provide the income for your lifetime, they invest the capital in a mix of low risk investments mainly government gilts and corporate bonds.
What are the charges for conventional annuities?
The charges the annuity provider makes will be reflected in the annuity rate they offer to their customers. The charges are in respect of the costs and expenses they incur, such as marketing, administration, investment management and commission.
Apart from conventional annuities, what other options are available?
If you are willing to accept a degree of risk and require some flexibility from your annuity,. you may wish to consider an asset backed annuity - either with profits or unit-linked. The value of your income can fluctuate with this type of annuity as it is linked to stock market or provider performance.
What tax will I pay?
Currently, the income you will receive from your pension annuity is taxed as earned income. In most cases the annuity provider will deduct income tax based on your tax code before they pay you and pass the tax onto HMRC. Initially your income tax may be based on an emergency tax code.
How do I know which annuity to choose?
Once you have bought your annuity you cannot change your mind so it's important to make the right choices. We provide all the information you need to make an informed choice on our website and have a team on hand to answer any queries you may have. Simply apply online for your personalised annuity quote.
Are there any risks with annuities?
A conventional annuity is a very safe option when looking to set up a regular income to help replace a salary or wage in retirement. You cannot outlive payments and the rate you agree at the outset will continue for the rest of your life. There is a degree of risk with asset-backed annuities as these are linked to stock market or provider performance so your income can fall as well as rise.
How much does the annuity service cost?
Our charges are built into the price of your annuity should you decide to go ahead. So, you have nothing to lose - apply now and see if we can get you a great deal on your retirement income.
Where can I find out more about the annuity service?
More information can be found in our key facts document.
