What is an annuity?

An Annuity is a financial policy that guarantees to pay a secure income for the rest of your life, no matter how long that is.

When you purchase an annuity you convert your pension pot into a stream of future income for the rest of your life.

A traditional annuity pays a guaranteed income for life and it is possible to get a higher income if you smoke or have a medical condition.

The case for annuities?

The case for annuities is strongest when you want a guaranteed income for life and you are prepared to forgo the option to have flexibility (and the associated risks) in favour of peace of mind and security.

The case for annuities gets stronger as you get older because many people want to take less risk and have more guaranteed income. Also, the benefit from ‘mortality cross subsidy increases with age’.

Advantages & disadvantages?

What to look for when considering an annuity

Generally speaking, when purchasing an annuity there are four things to watch out for:

  • Have you selected the correct options; e.g. single or joint and level or escalating?
  • Have you taken your health into consideration?
  • Have you obtained the best (highest income) quotation?
  • Is this the right time? (taking age and state of the market into account)

Use my unique annuity calculators and charts to compare the options and follow the trends.