• Retirement
  • Annuity

Annuity

If you want peace of mind, an annuity can go a long way.

Is an annuity for you?

Visit our annuity quotation portal for a no-obligation free annuity quote

What’s an annuity?

It’s an insurance policy that’s purchased with all or part of your pension savings. The insurance company guarantees to pay you a certain level of income, usually for life.

There are different options for your annuity, such as having payments that increase each year or provide benefits for loved ones when you die.

You may be able to get a higher income if your life expectancy is lower than the average, as a result of your lifestyle or medical conditions.

You can take part of your savings (usually 25%) as a tax-free lump sum before you buy an annuity, but the annuity payments will be subject to income tax.

When might it be a good idea?

  • A lifetime annuity is the only solution that can guarantee you an income for life
  • You can provide for your loved ones when you die, and also opt for an income that increases each year
  • If you suffer from a medical condition or lead a lifestyle that could shorten your life expectancy, you can buy an annuity that will boost your income

What should you keep in mind?

  • In most cases, buying an annuity is an irreversible decision
  • Generally, no payment is made after your death, though there are options that can provide for some payment in limited circumstances
  • While payments from a lifetime annuity are guaranteed, you’ll not benefit from any market growth
  • If you want an income that increases with inflation, this can be expensive to buy

Shop around

Always shop around for annuity. Make sure you use an adviser or broker who’s able to recommend products from across the whole market. Not just a handful of providers.

What types of annuities are there?

Conventional annuities

This pays a guaranteed income for life that never falls below the amount payable initially. In other words, you’ll receive the same income for the rest of your life, with arrangements for your income to increase each year.

Impaired or enhanced annuities

If you suffer from a medical condition or lead a lifestyle that could shorten your life expectancy, insurance companies will pay you a higher income for life. This could include high blood pressure, high cholesterol and diabetes. If you’re a smoker or drink more than a certain amount each week, these could also qualify you for a higher income.

Fixed term annuities

If you just want a temporary income, you can buy a product that’ll pay you a guaranteed income for a fixed number of years

Investment-linked annuities

If you’re prepared to take some investment risk but still need a minimum income for life, you could consider an investment-linked annuity. These products will usually offer a minimum income guarantee, but hold the prospect of growing income.

Please know, however, that the value of your income can go down as well as up, depending on the performance of the investments.

Joint-life annuities

It’s possible to buy an annuity that continues to pay an income to your spouse. This will generally pay a lower annual pension than a pension based on your life only. The younger your spouse, the lower it’ll be, as it’s likely this annuity will have to pay out for longer.

Pension Wise

The Government's Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.pensionwise.gov.uk or over the telephone on 0800 138 3944.

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Important information

This information is not investment advice or a recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure of the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s Retirement Service on 0800 368 6882 or refer to your financial adviser.

The value of investments can go down as well as up and you may get back less than you invested. Eligibility to invest into a pension depends on personal circumstances and all tax rules may change. With pension products you will not be able to withdraw money until you reach age 55.