nigel woollsey

Nigel Woollsey

Online Writer
Published: 19/03/2019

At a glance

  • An annuity is an insurance product which guarantees you an income in retirement for either a set period or the rest of your life (normally the latter).
  • This is done in exchange for your pension pot.
  • Unless you have arranged otherwise in advance, upon your death any monies still remaining in your pension pot will go to your annuity provider and not your next of kin.

Introduction

An annuity provides a guaranteed income throughout your retirement. It uses your pension pot to 'buy' a regular monthly payment, and the guaranteed nature of it means it's an important option to consider. However, it's also one of the biggest financial decisions anyone will have to make, so getting it right is crucial. Make sure you consider all the options available to you regarding your pension income. Changes that came into effect in April 2015 give more flexibility on how you use your pension pot, so it's more important than ever to weigh up all your choices.

So, if you do decide on an annuity, just how can you make sure you get the right rates?

Make sure to shop around

Despite the amount of money involved, research has shown that far too few people shop around when purchasing an annuity. The complexity surrounding annuity rates probably explains why a lot of people choose to take the easy option and accept the package offered by their pension provider. However, this could be a big mistake – once you've bought an annuity you can't change it, and if you don't find the best rate, you could miss out on a significant amount of income.

Luckily we've got our very own online Annuity Service to help you compare rates, ensuring you can get the best value from your pension pot.

Do you qualify for an enhanced annuity?

Standard annuities may be the most popular choice, but many people fail to consider the option of an enhanced annuity. If you have a certain health condition or lifestyle consideration, you'll often be eligible for a higher income, with the annuity provider basing its decision on the assumption that they'll have to pay out for a shorter length of time than if you didn't have such a condition.

Those who may be eligible for an enhanced annuity include people who have (or have ever suffered from) illnesses such as cancer, heart disease, a stroke or diabetes; those who regularly smoke, drink alcohol or are overweight; and even those with high blood pressure or cholesterol. 

Moneyfacts tip

Moneyfacts tip nigel woollsey

As with so many financial decisions, getting advice is key. Failing to seek appropriate advice probably explains why so many people end up with poor value annuities, either by failing to shop around or not getting the kind of enhanced income they could be entitled to.

What next?

Unsure of what annuity is right for you? Call our annuity service directly on 01737 233 435.

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.

stack of paper with question marks on table

At a glance

  • An annuity is an insurance product which guarantees you an income in retirement for either a set period or the rest of your life (normally the latter).
  • This is done in exchange for your pension pot.
  • Unless you have arranged otherwise in advance, upon your death any monies still remaining in your pension pot will go to your annuity provider and not your next of kin.

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