Buying an annuity with some or all of your pension savings guarantees you an income, either for the rest of your life or for a fixed time period. What that income will be depends on the provider and product you choose, so it’s important to explore and understand all your options before you buy.
An annuity pays out a guaranteed income for life or for a set period of time, depending on the product you chose. What that income looks like will vary according to things like your health and lifestyle, market rates and your age at the time you chose it.
You don’t need to use your whole pot to get an annuity. You may be able to take a tax-free lump sum (usually a quarter of your pension pot) and use the rest for your annuity and create an income. An annuity is seen as an income so it may be taxed using income tax rates.
There are lots of options to choose from. We want to help make sure you understand them all, because once you’ve bought your annuity you can’t change your mind.
It’s best to take advice from an independent financial adviser, and make use of the free and impartial guidance offered by Pension Wise which is part of MoneyHelper, the UK government’s free money advice service.
The more information you have before you make a decision, the better equipped you’ll be to make the choice that’s right for you.
The next page tells you more about different types of guaranteed income and the options you need to consider. It also suggests some other options if you think an annuity is not right for you.
Types of guaranteed income
