Annuity Process

The following is a detailed breakdown of the annuitisation process which applies as you approach retirement, and refers to the actions taken by your current pension provider.

Stage 1, towards a better annuity income

4 to 6 months before expected retirement

You get a wake-up letter advising you of the impending retirement. You also receive general information, along with a deferral form which allows you to postpone buying your annuity.

This comes from the company holding your pension fund, and they will provide you with the appropriate information. At this stage you don’t need to do anything unless you are considering annuity deferment and putting off buying your annuity until a later date.

However, an annuity from your current pension provider may not result in the best deal for you. It is in your best interests to take responsibility at this early stage to find yourself the right annuity, with the right options, and the right rates. It is at this stage that you start looking around to see what else is available. Early planning will bring the best results.

Stage 2

6 to 8 weeks before expected retirement

You will be sent initial annuity quotes, along with details of annuity payment options. You will have a form to complete to indicate your preferred option.

At this stage you indicate your preferred annuity options to your current pension provider.

Stage 3

2 to 3 weeks before your expected retirement

You will receive a guaranteed quotation from your current pension provider.

At this stage you are to return a form, committing to your selected option.

Stage 4

Arranging the annuity

Your current pension provider will begin the process of converting your pension fund into an annuity.

Important footnote; remember the open market option

The process outlined above applies if you take your annuity from your current pension provider, which may not result in the best deal for you. It is in your best interests to take responsibility for finding yourself the best annuity as soon as Stage 1 starts, if not before. It is likely that your current pension provider will not offer you the best solution and you will find a better deal elsewhere.

For example, they might offer you a conventional annuity on a single life basis, when a joint life annuity may be more appropriate, or maybe you have ill health and would be better off with an enhanced annuity or an impaired life annuity instead.

Utilising the open market option you have the right to shop around to find yourself the best annuity type and the best annuity rates to suit your individual circumstances.