Annuity

About annuities

An annuity pays you a guaranteed income for life. It is a policy that converts a lump sum (normally your pension pot) into a series of regular income payments for the rest of your life no matter how long you live.

Annuities are provided by insurance companies who invest your money in secure assets and will pay you a regular income every month (other frequencies are available) for the rest of your life. If you select a joint annuity, and you die before your spouse or partner, the income will continue for the rest of their life.

The amount of annuity income depends on a number of factors including:

• Your age and health – the older you are the higher the annuity payments and if you have certain health conditions you may qualify for a higher (enhanced) annuity
• Interest rates – annuities are priced with reference to bond yields (fixed interest investments) so when yields are low annuity rates are low and vice versa
• The annuity options – e.g. single or joint life, level or increasing, income guarantee period or value protection and choice of payment terms.

Enhanced Annuity - You can get a higher annuity income if you smoke, are taking prescription medication or have recently had medical treatment for a condition.