How Annuities Work
Turn Your Pension into Guaranteed Income for Life
A pension annuity allows you to convert some, or all of your pension savings into a guaranteed income.
At a Glance
Guaranteed income
Payments can last for life
Option to take tax-free cash
Available from age 55+
Compare rates from leading UK providers
In exchange for a lump sum from your pension, an annuity provider pays you a regular income.
Find out how much income your pension could provide.
Depending on the options you choose, this income can continue for the rest of your life.
What is an Annuity?
An annuity is a retirement income product purchased using money from your pension pot.
Instead of leaving your pension invested, you exchange some or all of it for a guaranteed income.
Some retirees choose annuities because they offer certainty. Once your annuity is in place, you'll know exactly how much income you'll receive and when you'll receive it.
How Does a Lifetime Annuity Work?
Buying a lifetime annuity is straightforward:
Step 1: Use Your Pension Savings
You use some or all your pension fund to purchase an annuity.
Step 2: Choose Your Options
You can decide whether to:
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Take tax-free cash
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Protect your spouse or partner
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Add death benefits
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Increase income over time
Step 3: Receive Guaranteed Payments
Your provider pays you a regular income which can continue for the rest of your life.
How Much Income Could You Receive?
The income available depends on factors such as:
Your age
Your pension value
Current annuity rates
Your health and lifestyle
The options you choose
If you have medical conditions, take prescription medication, smoke or have previously smoked, you may qualify for a higher income through an enhanced annuity.
The only way to know exactly how much income is available is to compare personalised quotes.
See current annuity rates and compare quotes in minutes.
Can You Take Tax-Free Cash?
What Happens When You Die?
You can choose options that help protect your loved ones. Common options include:
Joint Life Annuity
Continues paying an income to your spouse, civil partner or dependant after your death.
Guarantee Period
Ensures income continues for a minimum number of years.
Value Protection
Allows part of the money used to buy the annuity to be returned to your beneficiaries if you die early.
Why Do People Choose Annuities?
People may choose annuities because they want certainty in retirement with a guaranteed income.
Benefits of an Annuity
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Guaranteed income for life
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No stock market risk
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No ongoing investment decisions
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Peace of mind in retirement
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Potentially higher income for those with health conditions
An annuity can help ensure you never run out of retirement income, regardless of how long you live.
Compare Annuity Rates
Annuity rates vary between providers, which means shopping around could help increase your retirement income.
With Annuity Ready, you can compare personalised quotes from across the open market and see whether you're eligible for enhanced annuity rates at the same time.
Find Out How Much Your Pension Could Pay
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Quotes from leading UK providers
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