FAQs

These are some frequently asked questions, with our responses, to try and assist you with any queries you might have. 

What is an annuity?

An annuity uses the proceeds of your pension fund to provide a guaranteed retirement income. It is important that you select the right type with the right annuity options because it is a one-off decision, and getting it wrong can prove costly. See the annuity guide page for details of the various annuity types available to you.

Do I have to take tax-free cash?

You don’t have to take your tax-free cash entitlement, which is normally limited to 25% of the value of your pension fund at retirement. If you don’t need to take it, then there is more to buy your annuity with. However, most people do take all, or most, of their entitlement. After all, it is tax free.

Do I have to buy an annuity from my pension provider?

You don’t have to take your annuity purchase from your current pension provider, and often that company will not offer you the best deal or even the right options. Your pension policy contains an open market option which entitles you to shop around for the best deal for your individual circumstances.

Why should I use this service?

There are benefits of using this service, and you have options

Option 1

You could do nothing and just stay with your current pension provider, and receive, say, £1000 per year in annuity income.

Option 2

You could use this service and let us shop around for you. If you’re fit and healthy we could get you, say, £1,170 per year, and if you have ill health we could get you, say, £1,300 per year, or more! 

Which option would you prefer?

Where can I buy an annuity?

As you near retirement you will most likely receive annuity quotes from your current pension provider. You do not need to take your annuity from that provider and in most cases you will get a better deal elsewhere. You can choose to utilise the open market option to shop around to find another company to provide your annuity, and the chances are you’ll find a better deal.

We can assist you in obtaining competitive annuity quotes, and we can handle the administration for you. Our quotes are free and you are under no obligation to take up our recommendations.

Are there differences between annuity providers?

There can be a wide variation in the annuity rates available, even for those who are considered to be fit and healthy. This is because only a few insurance companies (the annuity providers) want to be competitive in this market. A quick look at the standard annuity rates webpage illustrates this.

Some annuity providers specialise in offering enhanced annuities or impaired life annuities only, and warrant consideration if you suffer from ill health or if you are a regular smoker. These annuities can offer you a much higher retirement income than a standard, conventional annuity.

How long does it take to set up an annuity?

It takes around six to eight weeks to set up your annuity, but it could take less time or more time, depending on the efficiency of your current pension provider in transferring your pension fund monies to your chosen annuity provider.

Are annuity rates guaranteed? 

We’ll try to ensure you get the same annuity rate as when you received your annuity quote, however annuity rates do vary over time. Most quotes are guaranteed for 14 days, although we can offer enhanced annuity rates and quotes guaranteed for 45 days.

If the funds are not transferred over from your current pension provider to your selected annuity provider during that guarantee time and the annuity rates have changed, then your annuity payments will also change.

It is therefore important when you have made up your mind that you try to return to us the appropriate application forms and other documentation as soon as possible after receiving them.

Does where I live make a difference?

Where you live can make a difference to the annuity rates offered to you because of what is now known as postcode annuities. Basically, people living in less well off areas (around Glasgow, for example) aren’t expected to live as long as people living in more wealthy areas (the home counties, for example) and therefore an insurance company will offer higher annuity rates to the former because they don’t anticipate making payments for quite so long.

Can I get better annuity rates if I’m a smoker?

Regular smokers are eligible for higher annuity rates, perhaps up to 20% higher. See smoker annuity rates for example quotes.

Can I get better annuity rates if I suffer from ill health?

If you suffer from ill health you might be eligible for higher annuity rates. These could be up to 30% higher, or even more if you have a serious illness.

How can I get financial advice?

You can get financial advice by utilising the service we offer with AEGON Direct. Their advisers will help you source the best retirement solution.

Is there more you want to know?

You might well have other questions you would like answers to. We have attempted to provide further responses on More FAQs. However, if you require further information, please call us free on 0800 077 35100800 169 1256 and we will try our best to help you.