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Annuity jargon buster

Category: Annuities
Author: Tim Leonard
Updated: 26/03/2018

What is an annuity?

One of the options you have in retirement is to buy an annuity with the money you've saved in a stakeholder, workplace or personal pension fund. You can choose to take up to 25% of your fund as tax-free cash, although this will mean you'll have less with which to buy an annuity, and as a result will receive a lower income in retirement.

Once bought, your annuity will pay you an income for the rest of your life. Income from an annuity is taxed in the same way as employment income and is usually paid net of basic rate tax. Higher rate taxpayers may be liable for additional tax.

Annuity jargon

There are many different features and options open to you when choosing the best annuity, so we've compiled a jargon buster for some of the common terms you are likely to hear.

We have more guides and jargon-busting explanations in our retirement planning section.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.