What is an Annuity?

You can buy an annuity from an insurance company to convert your pension fund into income which the insurance company guarantee to pay for the rest of your life.

All contributions into your pension fund will have had the benefit of maturing in a tax free environment, but any pension income you subsequently receive is liable to income tax. However, Inland Revenue rules currently allow you to receive up to 25% of your fund tax free to spend as you wish, if your fund is derived from a pension top-up scheme such as an AVC or FSAVC the whole of the fund must be used to buy your annuity.

It is well worth considering taking the maximum tax free lump sum and using all, or part, to provide an additional income, for example investing in Corporate Bonds or Single Premium Investment bonds. We are happy to provide additional advice in this area if you require this service.

If you or your spouse smoke or have a health condition you can frequently obtain a higher income through enhanced or impaired rates.

Generally, men will receive a higher rate than women from the same fund size, due to the fact that on average women tend to live longer.

You cannot change your mind once you have decided which annuity to go for.