Pension Annuity

A conventional annuity is the most common type of pension annuity, and is applicable if you’re in good health. It guarantees at the outset how much income you’ll receive from year-to-year.

Annuity rates

If you’re in good health annuity rates can vary by as much as 20% between different insurance companies. See the annuity rates page for examples of the highest rates available.

A conventional annuity provides a known and secure level of retirement income for the rest of your life, allowing you to easily budget your outgoings against your income. It provides an income for life – an insurance against living too long and outliving your means. You can choose to have your income (before tax) increase at a fixed rate per year, or in line with the Retail Prices Index (RPI), and help offset the impact of inflation.

The buying power of a conventional annuity may not keep pace with inflation, even if you choose an increasing income (aside from RPI-linked). The higher the increase you choose, the lower your starting income will be. You’re locked in at today’s interest rates for the rest of your life (annuity rates go up and down with interest rates, although this could be an advantage when annuity rates are high).

To obtain your free, no obligation annuity quotes enquire online, or call us free on 0800 0124 374 – we’re here Monday to Friday, 9 am to 6 pm.

Annuity income

Income from a conventional annuity can either continue as level or go up by a fixed amount each year. If you opt for an increasing annuity income your initial income from your conventional annuity will be a lot less.

Level annuity income

The basic annuity you can arrange is one that will pay you the same amount of income every year throughout your retirement. It never goes down and it never goes up.

At first this may sound like a good idea, and certainly a level annuity will often give you the highest starting income of any of the retirement income products (an enhanced annuity will pay you more if you have any medical or lifestyle issues). But what about coping with increasing prices? With inflation, the purchasing power of your income will forever be decreasing.

Increasing annuity income

There are steps you can take to protect your annuity income at least partially from inflation. You can choose to have guaranteed increases (also known as ‘escalation’) built into your annuity each year, although this will mean a reduction in your starting income. The more common increases are 3% and 5% per annum.

This increase is guaranteed throughout your retirement. It will never fall. But the higher the rate of increase you choose when you buy your annuity, the more your initial income will be reduced. Although your chosen rate of increase may not protect you fully from the effects of inflation, you’ll have better protection than if you had no increase at all.

RPI linked annuity

The best protection against inflation is to have the annuity income RPI-linked, meaning it goes up each year in line with the changing Retail Prices Index. However, this may protect against inflation, but it is expensive, meaning that a much lower initial income will be payable. See inflation proof annuity for details.

Annuity options

Your annuity can be tailored to meet your individual requirements. Not only can you choose how to take your income, you can also provide financial protection for your dependants with a guarantee period or a joint life annuity. Your various options are explained fully on the annuity options page.

To obtain your free, no obligation annuity quotes you can enquire online, or call us free on 0800 0124 374. One quick free phone call from you can make all the difference. We’re here Monday to Friday, 9 am to 6 pm.