General Annuity questions

What kind of annuity is right for me? (click for answer)

     There are several types of annuity you can buy with your pension fund to turn it into an income: WITH-PROFITS ANNUITY: This is the most common form of investment-linked annuity. The income you receive each year depends upon the performance of the With-Profits Fund, the way in which your annuity is arranged at the outset and any bonuses that we announce. Your income has the potential for growth above inflation over the long-term. Income from With-Profits annuities can go down as well as up. GUARANTEED PENSION ANNUITY: This is also known as a conventional annuity that could either provide from the outset a guaranteed level income that you will receive from year to year. This allows you to budget easily, but your spending power can be reduced by the effects of inflation. Or you can help to give your income some protection by choosing fixed yearly increases, or by keeping it in line with inflation, but you will need to accept a lower starting income. ENHANCED ANNUITY: The two annuities above may be available on enhanced terms to give you a higher income should you be suffering from a serious medical condition. FLEXIBLE LIFETIME ANNUITY: This option is for people with a pension fund of £75,000 net or above, who want more choice over the income they receive and how their money is invested. The value of your investment may go down as well as up. This means that your income in retirement has the potential to increase or decrease.

What Is An Annuity? (click for answer)

     An annuity is an arrangement that guarantees to provide you with an income for the rest of your life in return for you paying over a lump sum from your pension fund.

Will my wife/husband/civil partner continue to be paid after I die? (click for answer)

     Your wife/husband/civil partner will continue to receive payments after you die if you purchase your annuity on 'joint-life' terms.

How am I taxed on the income from my annuity? (click for answer)

     If you are a United Kingdom basic rate taxpayer, you will be taxed at the rate of 20% on your annuity income. If you are a higher rate taxpayer, you will be taxed at this higher rate.

When should I buy an annuity? (click for answer)

     You don't have to buy an annuity when you reach the retirement age shown on your pension plan. You may be able to continue working full or part-time and make extra payments into your pension pot, or you can just leave your fund invested while you make a decision. The Government has changed the minimum retirement age to 50 for all pension plans. Then, from 6 April 2010, to 55. Regardless of the type of pension you have, you don't have to stop working to take income from your pension. However, if you decide to take any Tax Free Cash, you must do this before you're 75th birthday.

How will my income be paid? (click for answer)

     Your income will be paid in regular instalments. You can normally choose to be paid monthly, quarterly, half-yearly or yearly, and 'in advance' (at the start of the period) or 'in arrears' (at the end of the period). Whatever the frequency, you'll get the highest income if you can be paid in arrears.

Do I need to take a lump sum? (click for answer)

     Although most people decide to take a tax-free cash sum up front, you don't have to. You could keep it in your pension fund and use it to buy a larger retirement income. However, as the income payable through a personal pension or retirement annuity policy is taxable, this may not be the most tax-efficient way to provide any extra cash flow you need. You will lose any right to a tax-free lump sum if you are not paid it before your 75th birthday. An option might be to consider using your tax-free cash sum to secure what is known as a purchased life annuity where only a part of the income is taxable.

Enhanced Annuity questions

What illnesses qualify me for an Enhanced Annuity? (click for answer)

     We may offer an enhanced income to you or your dependant, on a joint - life plan, if you suffer from any one of the illnesses covered by our plan that reduce your life expectancy. An enhancement is not guaranteed, and it will be dependent on the severity of the condition. Below are some typical examples of the illnesses, which could qualify for enhanced terms: Stroke Heart disease Diabetes Cancer Liver disease Kidney disease Lung disease Diseases of the central nervous system However, this isn't a comprehensive list, so it's worth checking if specific medical conditions are included.

Do you offer Enhanced Annuities to someone who smokes? (click for answer)

     No, we do not offer an Enhanced Annuity to someone who smokes, however if you or your dependant on a joint-life plan, suffer from any related illness that could reduce your life expectancy, we may still be able to offer you an Enhanced Annuity rate.

How long does it take to receive an Enhanced Annuity quotation? (click for answer)

     In most cases, an illustration will be provided within 72 hours using the information in our questionnaire. For more serious conditions, we will need to obtain detailed medical evidence by writing to your GP. This means the process will take a little longer, but this will enable us to offer you the best possible terms.

How much extra could I receive? (click for answer)

     The enhancement paid varies by the severity of the condition, but typically customers who do qualify could expect to receive an increase of between 2% and 15%.

What is the minimum amount that can be used to buy an Enhanced Annuity? (click for answer)

     You may buy an Enhanced Guaranteed Pension Annuity or a With-Profits Annuity if you have a pension fund worth £20,000 after taking any tax-free cash.