13/06/2022

10 mins

Annuities are irreversible – once you’ve bought one, you can’t change your mind. That’s why it’s so important to get expert annuity advice before you make the purchase to make sure you’re doing the best thing for your retirement future.

With an annuity, you exchange the pension savings you’ve built up across your working life for a guaranteed income until you pass away. A pensions expert can advise you in a number of areas, whether this is how to find the best annuity rate to deciding if an annuity is even right for you in the first place.

Above all, an expert can look at your retirement savings and your financial goals for your later years to help determine the best options. After all, you’ve saved long and hard for your retirement — you want to make sure that you’re getting the best pension that’s available with that money.

What is a Retirement Annuity?

An annuity is a promise from an annuity company to pay you a guaranteed regular income for the rest of your life. For those with a defined contribution pension, at retirement you exchange all or some of your pension pot for these regular payments. With an annuity, your pension can never run out — it’s a promise to pay until you pass away.

How much annuity income you’ll get from your pension pot depends on a number of factors, including:

Your age
How long you’re expected to live
Any health / medical conditions you have
Whether or not you smoke
Your location (this matters as life expectancy varies across the country)
The type of annuity you’re looking to buy.

Until the 2015 pension freedoms, most people had to buy an annuity. Anyone who’s savings were below an arbitrary figure had to buy one, followed by everyone needing to buy one at age 75 regardless of the size of your retirement pot.

Now, you have much more freedom when it comes to how you want to spend your pension savings and other options to choose from.

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Different Types of Annuity

There are many different types of annuity for you to consider; some of the most common ones are listed below.

Enhanced annuities
If you’re ill or you smoke, your life expectancy is seen to be reduced and so you’re often offered a higher annuity rate than a healthy non-smoker.
Joint annuities
Joint annuities continue paying out to a partner or spouse after your death, useful if your spouse/partner doesn’t have a pension of their own.
Annuity with guarantee period
A guarantee period is a set period from the date of the annuity starting; if you pass away within this guarantee period, your annuity will continue paying out for the remainder of the guarantee period.
Index-linked / escalating annuity
An indexed annuity will rise each year in line with inflation to prevent your income remaining fixed over the long-term and being eroded by inflation.
Temporary annuity
Rather than paying out for the rest of your life, a short-term annuity will pay out for a fixed period, say 5 or 10 years, making them typically cheaper than lifetime annuities.

Ask jonathan cooper, senior paraplanner at Drewberry, for annuities advice

There are so many different types of annuity available that it can be hard to know which one to choose.

Ultimately, if you decide that an annuity is right for you then you want to make the choice that results in you getting the best possible pension for your money.

Jonathan Cooper
Senior Paraplanner at Drewberry

Should I Buy a Lifetime Annuity?

Following the 2015 pension freedoms, no one has to buy an annuity if they don’t want to. So is it still worth buying an annuity?

Advantages of Annuities	Disadvantages of Annuities
Annuity rates are currently low, meaning you get less income than historically for your cash	Your annuity pension will never run out, no matter how long you live
If you want to ‘extend’ the life of an annuity in any way, perhaps with a joint annuity or a guarantee period, you’ll typically get a lower initial income	You can index-link an annuity so it keeps pace with inflation
There’s no chance of your pension pot increasing in retirement thanks to investment returns	If the markets fall, your pension income won’t be affected
Annuities are irreversible – once you’ve bought one, you can’t change your mind	If your spouse / partner doesn’t have much of a pension of their own, a joint annuity can pay a pension to them on your death
A single annuity will stop paying out after you die, so you won’t have anything to leave to relatives even if you haven’t received everything back in pension income that you paid in	You can get a higher income from an annuity if you have health problems

If you want a steady, reliable income for the rest of your life and aren’t concerned about the lack of investment opportunity, then an annuity may suit you best.

If, however, you want an improvement on the low rates currently on offer and chance for your pension to continue growing after you retire, an annuity may not be right for you and it may be worth considering pension drawdown instead. As always, this is best discussed with an adviser so you know you’re making the right decision.

Compare Top 7 UK Annuity Providers In 2024

	Aviva Aviva is today the largest insurer in the UK, having grown considerably since it was formed through the merger of CGU PLC and Norwich Union in 2000. As part of its financial services offering, Aviva annuities are sold through its life and protection division.
	Canada Life Canadian insurer Canada Life’s UK operations were founded in 1903. The company further cemented its presence here in August 2017, when it bought another UK annuity provider, Retirement Advantage. Canada Life annuities include both fixed-term and lifetime options.
	Hodge Lifetime Founded in 1965, retirement income and lending specialist Hodge Lifetime offers a range of retirement solutions, including annuities and equity release. In 2016, Hodge Lifetime’s annuities saw the company win the ‘Most Competitive Annuity Provider’ award at the Moneyfacts Investment Life & Pension Awards for the second year in a row.
	Just Retirement Rebranded as JUST in 2017 following a merger with Partnership Assurance, the company previously sold annuities under both the Just Retirement and Partnership brands.
	Legal & General Legal & General is one of the best-known financial services brands in the UK. Founded in 1836, L&G’s annuities are backed by one of the oldest providers in the country.
	Liverpool Victoria Liverpool Victoria is a friendly society and one of the UK’s largest insurers that can trace its roots back to 1843. As well as offering general insurance products, LV is also one of the UK’s largest annuity providers.
	Scottish Widows Scottish Widows became part of Lloyds Banking Group in 2009, but has been operating since 1815. The Edinburgh-headquartered financial services firm provides Life Insurance, investments and pensions, including annuities.

What Are The Best Annuity Rates In 2024?

Total Pension Pot	60 Years Old	70 Years Old
£100,000	£4,412.52	£6,157.80
£250,000	£11,111.88	£15,254.40
£500,000	£22,254.11	£31,380.53

Annuities represent top quotes and are accurate as of July 23, 2019

The above annuity factor table is just a sample of how much annuity income you might get from your pension. To put it together, we’ve had to make a number of assumptions. The above annuities are level, so they won’t increase over time in line with inflation.

Other assumptions we’ve made include:

They’ve bought a single annuity
They’re a healthy non-smoker with no medical conditions
They don’t want a guarantee period so the annuity will keep paying after their death
They live in East Sussex, in the same postcode as our Brighton-based financial advisers.

Get Pension Annuity Advice and Best Quotes

Everyone is different, so why not use our Annuity Rates Calculator to find the best retirement annuity rates for you as an individual?

Our calculator compares annuities from several of the UK’s leading providers to find you the best annuity deal on the market today.

Need Help? Get Expert Annuity Advice

With so many different types of annuity available, it’s easy to lose sight of the big question: is an annuity actually right for you in the first place?

Annuities have traditionally been the path retirees take when looking to monetise their pension savings, but they’re no longer the only option.

If you’re looking for more flexibility, the chance for investment growth in retirement and favourable rules surrounding leaving pension pot lump sums to loved ones, an annuity is unlikely to be your best option.

Why Speak to Us?

We started Drewberry because we were tired of being treated like a number. We want to give you as our client the service you deserve when discussing matters as important as planning your financial future.

Below are just a few reasons why it makes sense to let us help:

See your financial future
Our sophisticated financial modelling technology visually maps out your financial future. Get a living financial plan that clearly shows what you can achieve depending on the decisions you make — read more here.
Achieve the retirement you deserve
Can you afford that dream round-the-world trip? Can you help your children onto the property ladder? We’ll model your goals and build your financial plan to help you achieve them.
Our expertise saves you time and provides peace of mind
We take care of it all, from organising your pensions, investing your assets, managing risk and making the most of your tax allowances.
We’ve got bargaining power on our side
This allows us to negotiate better rates for you than dealing with providers yourself.
You’ll speak to a dedicated expert from start to finish
You’ll speak to a named expert with a direct phone line and email. No more call centres and machines asking you to press this and that — you’ll speak to someone who knows you.
Benefit from our 5-star service
We pride ourselves on providing 5-star service, as seen in our 3900 and growing independent client reviews rating us at 4.92 / 5.
Gain the protection of regulated advice
Our regulated advice service means you are protected. We’re responsible for the decisions we help you make. Doing it yourself or going direct to a provider doesn’t offer this protection, so you won’t benefit from these securities.

It can often be one of the biggest decisions of your life and so it is important to get it right.

If it is all getting a bit confusing and you need help deciding on the best retirement options for you please do not hesitate to pop us a call on 02084327334 or email help@drewberry.co.uk.