Annuity Purchase

You’re able to buy a retirement annuity from age 55 onwards and this will provide you with a taxable guaranteed income for life – much like you would get from a regular salary.

Annuities are available on a single or joint life basis, and there are options to add features such as escalation to offset inflation and minimum guaranteed payout periods in the event of early death.

You can make an annuity purchase with all your pension savings, or it can be used alongside more flexible options such as a drawdown pension. For example: an annuity could be a good option to you pay for your core income needs in retirement or to add a layer of security if you have concerns that your pension money won’t last as long as you need it to.

How annuity rates are calculated

The amount of income that you will receive – or your ‘annuity rate’ – will depend on several factors, such as the value of your pension, your age, health; and any additional benefits you choose.

For example: a single life annuity will pay a higher rate than a joint life and an escalating annuity will have lower starting rate than a level (non-escalating) annuity.

All other things being equal, you are likely to get a higher annuity rate if you purchase It when you are older, as the provider will be making few payments. However, you may still receive less in total than if you had taken a lower income when younger.

Changes in interest rates can affect this and so should interest rates move lower as you get older this could offset the increase you would otherwise expect to get – and this works vice versa too of course.

Did you know?

You can still take up to 25% of your pension as a tax-free cash payment before buying an annuity.

You may be able to qualify for an enhanced annuity if you have certain medical conditions that affect your life expectancy.

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You can buy an annuity within a flexible drawdown pension. With this type of annuity, the income is paid into the pension instead of out to you as a taxable income. You then choose if and when you want to draw the income flexibly from your pension; or you can instead choose to invest some of the money for growth.

Would you like a free quote?

First Equitable is wholly independent and this means we have the advantage of being able to compare quotes from across the entire marketplace for you. To start with we will need to ask you some simple questions; your age, height, weight, whether you have any medical conditions etc.
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Initial Consultation

Making an annuity purchase is a big decision, as once made, you generally can’t reverse it. We talk some more about the advantages and disadvantages of an annuity purchase in our news article here.

One thing for sure is that retirement planning is often a complex area of financial planning, and an annuity purchase will have implications for you and your family (if applicable) for years to come.

Before deciding on anything, we would strongly advise talking your options through with a financial planner well-versed in all areas of retirement planning.

If you would like advice on making an annuity purchase, or to explore your retirement planning requirements in general, please get in contact to arrange an initial consultation at our cost. We look forward to speaking with you.

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