Annuity Options

What kind of options do I have?

What are the different types of annuity options?

Ask most working people in the UK and they will have at least heard of what is referred to as annuity. The truth is there is an array of options, the availability of these options depends on personal circumstances, health, family and how much income you want to draw annually.
You can take up to 25% of your pension/retirement tax free.

Tax Free Cash

An amount equivalent to 25% of the pension/retirement fund can be taken entirely tax free. Typical uses of this lump sump include, holidays, debt settlements and short term investments.

The allure of taking a large sum on commencement of your retirement is perfectly understandable; for some finishing work is a great relief and the chance to appreciate the transition with celebration and personal reward is entirely natural.

We believe in presenting all the facts relating to pension funds and to deliver a set of options in clear and precise meaning. You need to know how much income you can receive a year and how to obtain the highest amount relating to you personal circumstances and lifestyle. Taking the full 25% sum will strongly decrease the amount of annual income you are likely to receive from an annuity.

Income Options

Income from an annuity can be paid out, annually, half-yearly, quarterly, monthly, at the beginning of the year or at the end of the year. Keeping the money in the annuity as long as possible is a positive method of securing a higher annual income. The term annuity in arrears is used to define an annuity payment made at the end of a set period of time; thus allowing interest and the regular annuity amount to paid out from the overall fund.
Choose when you want your annuity income paid. 
Get paid the same amount of income every year. 

Fixed Income Annuity

A fixed income annuity provide you or can provide you and your spouse with a guaranteed income for either a set period, or until the end of your lives. The amount of income will stay the same year on year; it’s important to respect the erosion inflation will have on the purchasing power of your income over time.

For some retirees buying a 5 year fixed term annuity is a better option. At the end of the 5 years the remaining annuity pot can be used to purchase another annuity or invested elsewhere. The result is that a different income amount can be obtained, more or less depending on your needs.

Increasing Income Annuity

Increasing income annuities can use a standardised index to affect the increase income. The most regular sources used are the consumer price and retail price data indexes. This option is more suited to individuals that are going to depend in full on the income that is derived from the annuity.

The key point to remember is that the more time the funds remain inside the annuity, the more they will be worth and the higher the income that can be drawn. Increase offers that are to be applied to the income will lower the initial payments at the start of the annuity.


Increasing income annuity will gradually increase your income with each year.

small-stone What sort of protection does my pension get if I die?

With a bog standard annuity, at the point of death the fund ceases to pay out and is absorbed by the insurance company who arranged the annuity with you, children/dependants don’t get anything.

Single Dependent

This is the option that will cover those that only have a spouse or civil partner. It can also cover a single dependent excluding all others. It will cover that single dependent for the remainder of their life in the amount of 33 percent, 50 percent, 66 percent, or 100 percent of pension annuity income. There are restrictions placed by some companies as to the relationship of the dependent. In all cases a spouse or civil partner is covered and in most cases, children can be covered. There are even some companies that allow anyone to be named for the income.

Patrick wants to make sure his wife Carol continues to get an income after he dies. He has chosen to name her as a dependent.

Patrick now has peace of mind.

Using this option will lower the overall income of the fund, but will provide for that single family member an income of some level for their life.

Value Protection

This is the closest that a pension holder will get to “life insurance at the time of death, the value of the pension will be paid out minus the previous income deductions. There may be a tax liability and there may be concessions that the receiver will have to make if the allotment is made in their name. There are limitations that may apply as to who can access these funds once the original annuity holder has deceased and there will be a 55% rate applied if the annuity is derived in cash.

Value Protection will pay out the dependent after death the residue value of the pension.

With the Guaranteed Income your annuity will continue to be paid in full to your dependent even after your death.

Guaranteed Period

This denotes a time period in which the pension will continue to pay in full. 0,5 and 10 years  can be chosen and at the end of the time period the pension payouts will cease; there are annuity packages with options to prolong the payouts for a spouse/dependant. Choosing a guaranteed income period will lower the annual income amount.

Want more information?

Retirement options should never be decided on a whim, they deserve careful consideration. We believe that all our customers should receive the same service and options that we ourselves want in our retirement. If you’re unsure about what is right for you, or you simply want further information to help you make the right decision please talk to us.