What Is An Annuity?
An annuity is a guaranteed, regular income that you purchase from an insurance provider with your pension pot when you reach your retirement. When you purchase your annuity you will gain an income source from your provider for the remainder of your life, or even longer if you choose certain annuity plans.
Once you decide that you wish to retire at any point after you reach the age of 55, in most cases you can take anything up to a quarter of your pension fund in a tax free lump sum of cash. Anything you have left over can be utilised to purchase an annuity which will provide you with a source of taxable income for the remainder of your life.
Facts About Annuities
- The decision to buy an annuity is permanent, it cannot be reversed.
- The amount of income you receive from your annuity will rely on the rate the annuity provider is offering at the time.
- Annuity rates aren’t fixed they change all the time, so it may be worth delaying if you think that the rates will increase.
- It’s not compulsory to buy a annuity, there’s various other options for accessing your pension. But many people feel an annuity is the best choice for them.
- There are many different options when it comes to annuities, shopping around to find the best choice for you could increase your retirement income drastically.
- It isn’t compulsory to buy an annuity from the same provider that you keep your pension pot with, it may be in your best interest to look elsewhere to get a better deal.