Guide to Annuities
UK Pensions

When might I need an annuity policy?

In the UK, up until recently, it has been compulsory to convert at least 75% of your pension fund into an annuity when you reach age 75 (as at June 2010 the Government is currently planning to remove this age limit altogether). But even if you are under 75 there are still good reasons to have an annuity policy, especially if it's part of a retirement plan.

If you are lucky enough to be gifted an annuity through a charity or trust then obviously the extra income will be beneficial whatever age you are!

However, even if you are buying your annuity they are a good way to ensure a fixed and stable income when you stop working. Retirement annuities can also be set up to provide an income for two people, i.e. you and your partner or spouse. In addition to this pension annuities can be tailored to suit your personal needs, for example when setting up an annuity you can choose:

  • whether the income stays the same throughout your lifetime or increases each year,
  • to guarantee payments for a minimum period of time, such as five or ten years, even if you die within that period.
  • whether the income ceases on your death or transfers on to a spouse, civil-partner or dependant.
Buying an annuity is one of the few situations where being a smoker or having poor health can be an advantage when getting an insurance policy!

If you smoke or are in poor health your life expectancy is likely to be shorter, therefore life insurance companies can afford to pay you higher annuity incomes, because they expect to pay it for a much shorter time, than for someone who doesn't smoke and is in good health.

Based on the current UK population, the number of over 65s in the UK is set to swell by 60% to 15 million people in the next 20 years, and one of the biggest risks pensioners face in retirement is living too long and their savings running out. Buying an annuity can be a good way to ensure you have a retirement income for the rest of your life.

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Guide Contents

What is an Annuity?
When might I need an annuity policy?
Types of Annuities
Pension annuities
Annuity income options
Enhanced and Lifestyle Annuities
Impaired Life Annuities
Annuity Rates
Where can I go to get more help?

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