UK annuities

Annuity overview supplied by UK IFA NET who we believe to be the leading provider of annuity advice in the UK.

Many people assume in the UK that their money purchase pension plan automatically starts paying for their pension at retirement. This is not the case.

What your UK pension plan does provide is an accumulated fund of money, a Pension Fund. Part of this (usually between 25 and 30%) may be taken as a tax-free cash sum. The rest must be used to provide your pension income.

There are a few ways in which you can use this fund, the most common of which is to purchase an annuity. Put simply, an annuity is an income, provided by your UK pension fund, that is payable for the rest of your life. It is paid by an Insurance Company or similar specialist company, in exchange for your pension fund.

Some retirees also ask their adviser to use their tax-free cash sum (or any other available cash, for that matter) to purchase what is called a Purchased Life or Immediate annuity from the top paying annuity provider. This type of annuity also pays you an income for the rest of your life, but the income is only partially taxed.

There are a number of factors that influence the return you will get from your annuity. The most obvious of these is the size of your pension fund. The bigger your fund, the bigger your annuity income will be. Another major factor is mortality. Mortality is the calculation of the age to which you are expected to live. Because women tend to live longer than men, the company paying the annuity expects to have to pay woman for longer. Hence, women receive lower rates than men of the same age. Further information will be given with supporting data about the factors that affect income later on in this guide.

To request an annuity quote click here. Alternatively to be sent an information pack and request advice on the annuity alternatives please click here
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Your brief guide to Annuities from The UK IFA NET
All UK residents with a pension composed of money purchase pension fund (ie a personal pension, a stakeholder pension, section 226 retirement annuity contract, Free standing additional voluntary contribution, or money purchase company scheme) must use their fund to buy an annuity. Although the final date of purchase may be deferred to age 75.

The mechanics of annuities are fairly simple. The basic principle is that the annuity provider provides you with an income for life in exchange for your pension pot. Some people consider that the traditional annuity arrangements are a little unfair, in that the annuity stops when you die and the underlying fund is lost. This effectively means that those people who only live a short time after taking their annuity effectively subsidise those who are fortunate enough to live longer.

(Unless you have selected the joint life option or the guarantee option. For more information on the options available visit the annuity options page) Annuity rates are affected by a number of variables some that you have no control over, such as age and gender, and the additional annuity options that you may choose to select such as "index linking" or guarantees. As a rule of thumb the older you are the higher the annuity rates offered. This factor alone is sufficent for some people to consider one of the alternatives to the standard annuity contract such as Income Drawdown

It may not always be apparent but you have a legal right to purchase your annuity from a company other than the one that holds your pension fund. This is known as the open market option or OMO. It also makes good financial sense to compare the annuity rates available from the other providers.

Most people opt for a standard annuity we would recommend before getting a quote that you research the various options available with a standard annuity. To check out your annuity options click here

To research the alternatives to the traditional pension annuity Click here or use the navigation bar on the right to explore the site.

Contact UKinsurancenet on 0845 365 1264 and speak to one of our highly experienced consultants who will be pleased to give you a quotation. Or use our online service for instant results