What is an Annuity?

It’s fair to say that unless you are in the industry, most of us know very little about annuities, so it’s quite understandable that when it comes to thinking about retiring, choosing an annuity can seem like a daunting task.

So just what is an annuity and is it really that daunting?

Quite simply an annuity is the name given to the insurance plan that your pension and / or savings are paid into, giving you a guaranteed income for life.

Over the years you may have paid into several pension plans, so it’s important to track them all down. If you are unsure as to whether you have any 'old' pensions from previous employers or pension companies, you can find out by using the Pension Tracing Service a free service provided by the government.

There are several types of annuity to choose from and some important things to take into consideration such as your health and lifestyle which will impact the pension income available, in some cases increasing it by thousands of pounds.

To help guide you through the process, you will find all the information you need at Over50choices with Age Partnership on hand ready to search the market for the best deals.

We make the whole process clear, straightforward and certainly not daunting.

Choosing an Annuity

When it’s time to retire you can do one of three things with your pension fund:

  • Do nothing and accept the pension of offer from your employer; certainly the easiest option but one that could see you losing out on valuable pension income
  • Get advice from a Financial Adviser; a safe option but you will be charged for this service
  • Let Over50choices help you find the best annuity rates with our partners Age Partnership. They will compare the whole of the market for the best rates and see if you qualify for a higher income based on your health and lifestyle. What’s more, you won’t be charged for the service they provide as payment is made from your chosen provider.    

To help you see how much extra retirement income you could get, why not use the quick and easy annuities calculator, then if you want more information, the experts at Age Partnership are on hand to help.

annuity calculator

Pension Annuity - The new rules from April 2015

If your pension pot is available to access from April 2015, the good news is that you will have greater freedom to choose what you do with your money.

Previously, up to when the proposals were announced, you were only able to withdraw a maximum of 25% of your pension pot as a cash free lump sum. The remaining amount had to be used to purchase an annuity however all this is about to change.

To summarise, from April 2015, you will be able to:  

  • Take up to 25% of your pension pot as a tax free cash sum (this is already in place)
  • Withdraw the remaining 75% in one lump sum or in stages however this may be subject to income tax
  • Purchase an annuity to provide an income
  • Choose a combination of the above

These changes will affect all pension schemes however if you are in a ‘final salary’ scheme, you should seek independent financial advice before withdrawing more than 25%, as you could be giving up significant benefits.

In addition, there are certain interim rules that have been implemented in preparation for these changes in April 2015:

  • If you are 60 years of age or older and your total pension pot is £30,000 or less, you can now withdraw 100% as a lump sum, taking the first 25% as a tax free cash sum
  • The rules and limits have been relaxed on “income drawdown”: this type of pension lets you take an income from your pension pot whilst leaving the balance invested and is normally associated with larger pots, as it is more complex and usually requires advice.

Keep in mind that depending on your circumstances and financial position, withdrawing cash sums could affect your state benefits.

When the changes come into effect, help and guidance will be available from the Pensions Advisory Board, or you could seek advice from an Independent Financial Advisor, some of whom may charge for their services: the Money Advice Service can guide you on this.

Also visit our recent pension articles with all the latest updates here

annuity calculator

Countdown to Retirement

Planning your retirement is an important task; too many people just let it happen; go with the flow and as a result don’t get the best financial outcome and lifestyle they have worked hard for all their lives.

See our Pensions & Annuity Questions & Answers Section for more details

A key part of retirement planning is ensuring that you have sufficient retirement income; so if you’re not planning on retiring for some time, it is worth reviewing pension plans as soon as possible to ensure you are in the best position. Quite simply the earlier you begin, the happier your retirement could be!

As retirement day looms, there are a number of things you need to do so it is wise to start planning your final preparations 12 months before ‘D’ day. A word of warning; don’t put it off as it will come around quickly.

Here is a Quick Countdown Timeline

12 Months to Retirement

  • Review all your personal finances, savings, mortgage
  • Track down your Pension Pots – if you’re not sure where they are, try the free Pension Tracing Service
  • Consider what retirement income you will need
  • Decide whether you will be fully retiring or taking part time work
  • Ask your pension provider(s) what the value of your pension fund is
  • Start to shop around and compare annuities, just to give you an idea of what is    available. Remember as always that the internet is a valuable resource 
  • Plan what you will do with your new found freedom!

6 Months to Retirement

  • Your pension provider(s) will write to you and give you a valuation of your pension pot including your options. It’s likely to be a comprehensive pack giving you lots of information.
  • Remember you are under no obligation to take out your pension from this company so should not sign anything until you have done some research and compared their offer with what is available on the open market.
  • Keep in mind that you are entitled to take up to 25% of your pension pot as a lump sum, to do whatever you wish; take a holiday, pay off debts, make home improvements. It’s entirely up to you.
  • Use the Key Age Partnership Calculator to see how much income you could get. Their friendly team of experts will be on hand to help talk you through your options, find the best rates and establish whether you qualify for an enhanced annuity.

3 Months to Retirement

  • You will probably receive another letter from your existing pension scheme provider detailing your benefits and giving you options
  • If you have several pensions, you will need to contact the various pension providers if they haven’t already contacted you. It’s likely that you will get a better pension if you add them altogether so get quotes based on the total amount
  • You should also make enquiries about your State Pension. Click here to go to the Government website for more details.
  • Visit the Annuity Calculator again to see if annuity rates have changed and discuss your final options with Key Retirement

1 Month to Retirement

  • Compare annuity rates for the final time adding any additional options you require and apply for your annuity through Age Partnership
  • Retirement planning now completed - have a party and enjoy the rest of your life!
  • To help you see how much extra retirement income you could get, why not use the quick and easy annuities calculator, then if you want more information, the experts at Age Partnership are on hand to help.

Compare Annuities 

Compare Annuities and shopping around for the best annuity rates could really increase your pension income by a significant amount!.

For example an increase of 40% would see an annual income of £5,000 increase to £7,000; £2,000 a year more for the rest of your life, so it certainly can pay to shop around and compare annuities. 

To help you compare annuities and get the most from your pension pot, here is our Online Annuity Checklist

1. Compare Annuities and Shop Around!

You don’t have to stay with your pension provider. Use the Open Market Option and shop around for the best annuity that suits your needs. Start by using the Annuity Calculator to see how much retirement income you could get, then speak to one of the experts at Age Partnership to discuss your options and agree the best course of action.

2. Choose the right Annuity 

Standard annuity rates are based on the few known facts about you such as your age, how much your pension pot is worth, where you live, any tax free cash sum withdrawn and any additional choices you make such as index linking your income.

As the information about you is limited, the annuity rates offered with a standard annuity or a conventional annuity as its also known are not as advantageous as those offered with an enhanced annuity.

Enhanced annuity rates are based on additional information which results in a more personalised pension income quote.

You will be asked a broad range of questions about your lifestyle and health and in return, could benefit from a greater pension income. 

Like any insurance plan, the rewards and costs are based on the likelihood of that event occurring. In this case, if the insurance provider assesses you as a higher risk which could impact on the length of your life, you will be given an improved annuity rate which in turns gives you a greater pension income. This is one of the few times in life when potentially you could be rewarded for smoking, having a high cholesterol level or suffering ill health.

The good news is that the experts at Age Partnership will compare annuities and do all the work so you do not have to worry about whether a standard or enhanced annuity plan is the right one for you.

Investment Linked Annuities differ from conventional annuities as your pension or savings are invested in the stock market. This means that your income could go up and down, depending on how your investment performs within the fund of the annuity provider.

Pension Pot less than £18,000: If you are over 60 years of age and have a total pension fund of less than £18,000, you can withdraw all or part of your pension as a lump sum, referred to as ‘Trivial Commutation’. You can also ‘cash in’ any individual pension pots of £2,000 or less, regardless of the £18,000 ceiling.

More information can be found at the Money Advice Service website. 

3. Enhance your Annuity Options

You will have the opportunity to further enhance your annuity when you get a quote and compare annuity options:

  • Tax Free Cash: You will be able to take a tax free lump sum of up to 25% of your pension fund to spend as you like. A word of warning; take care as the more you withdraw, the smaller your pension income will be.
  • Annuity payments: You can choose to have your annuity paid in advance or arrears; monthly, quarterly or even annually to suit your own personal budget.
  • Inflation Proofing: Hopefully you will be receiving your pension annuity for many years to come, so you should take into consideration the impact inflation could have on the true value of your income.
  • You will be given several options to protect your income: please note that the more protection you build into your plan, the greater reduction you will see in today’s income. You are effectively sacrificing income today for increasing the income you receive for each subsequent year.
  • Dependents Pension: This option allows you to nominate a spouse or dependent to receive a percentage of your pension when you die. Once again the impact of this will reduce your pension income.
  • Guaranteed Period: Ordinarily if you were to die soon after starting the plan, your annuity would stop, so you could build into your annuity a guarantee that ensures continued payment of the income for a fixed period of time.

4. Feel comfortable with your decision 

Over50choices provides comprehensive guides and information that give you a greater understanding of your options and how to compare annuities and of course the experts at Age Partnership are on hand to help guide you through the process.

Over50choices and Age Partnership provide free factual information, help and guides, however neither company offer advice. 

If you are seeking independent financial advice, you can find an adviser at www.unbiased.co.uk. They will make a charge for this advice, so it is worth asking how much before going down this route.

annuity calculator

Annuity Rates - How do they Work?

Comparing annuity rates and getting the best annuity rate for your hard earned pension savings is one of the most important financial decisions you will ever make.

Once you have made your choice, you will be locked into that rate for the rest of your life; so choosing the right plan is key to optimising your retirement income.


Visit our recent pension articles with all the latest updates on the pension reforms here

Whilst each provider will base their pension annuity rates on your own personal circumstances such as age, health and lifestyle, they will also apply their own experiences and profit margins which is why they offer differing levels of income. 


Some will offer greater enhanced annuity rates for different health conditions or optional features such as index linking; so you can see why shopping around is so important.


This shouldn’t be daunting though as comparing annuity rates is a fairly straight forward process provided you give yourself sufficient time to consider your options.


The Age Partnership annuity rate calculator is a good starting point to understand how much more retirement income you could get.


It’s worth noting that a bit like interest rates, current annuity rates fluctuate over any given period of time, so it’s always worth getting new quotes to ensure you are getting the best annuity rates just before you apply. 


The team at Age Partnership will be on hand to answer any questions, search the whole of the market for the best annuity rates and help you make that final decision when the time comes.

annuity calculator

Annuity Calculator

Use the Annuity Calculator to see how much you can Boost your Pension Income.

You don’t need to know your exact retirement date or the precise sum of money in your pension pot, as you can update these at a later date. The annuities calculator will provide you with an estimated pension income, although more detailed annuity quotes can of course be provided.

It’s easy to use and once you have a feel for how much retirement income you could get, the team at Age Partnership will be on hand to search the whole of the market for the best annuity rates and see if you qualify for an enhanced annuity.

Remember that you don’t have to take your pension from your existing pension provider. Shopping around for the best annuity quotes not only means you could get a better pension income, it also gives you the option to tailor your annuity to suit your personal circumstances.

The annuity calculator is free and easy to use. It also gives you the opportunity to vary the amount of money you can take as a cash free sum (up to 25%) to see what impact it will have on your pension income.

annuity calculator

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