With UK life expectancy (the average number of years to live at any given age) generally improving, one consequence is that our finances must also last longer in retirement. One option, therefore, is to buy an annuity - a guaranteed income for the rest of your life or for a fixed term.
You can buy an annuity with some, or all, of the pension fund you’ve built up, and make sure you’ve got a reliable income for the future. There are different types of pension annuity to consider and various factors will affect your income, including:
- Your age
- Your health
- Interest rates
- The type of annuity you choose
- Whether you take 25% of your fund as a tax free cash sum
- Whether you provide a continuing income for a partner/dependants
Whatever type you buy, it is designed to provide you with a pension income. And, you don’t have to buy it from your current pension provider – what you get from different providers will vary, so it’s important to shop around.
For more advice on shopping around visit the Money Advice Service and Pension Wise. And, most importantly, depending on your health and lifestyle, you may be able to get a higher rate as a result.