How much annuity income will I get?

How much annuity income will I get?

A number of factors will influence the level of income you could receive from your annuity. We take a look at these below. Of course you don't have to take an annuity with us, and once you buy one you cannot usually change your mind. You should therefore shop around and depending on the choices you make, you may be able to get a higher income elsewhere. More information on how to shop around can be found on the Money Advice Service website.

  • The type of annuity you buy, plus any additional options you choose, will affect the income you will receive. For instance, you may choose a joint-life option, which will ensure that your partner can continue to benefit from your pension if you die before they do. This means your income will be lower than a single-life annuity. You could also choose a guaranteed payment period, which means that your annuity will be paid for a minimum number of years even if you die, but you'll receive a lower starting income than an annuity without one.

  • The amount of income you'll receive when you buy your annuity will also depend on how much of your pension fund you use to purchase the annuity once you have taken any 'cash lump sums' or funds to purchase a 'flexible income'. If you do want to take any of your pension as a cash lump sum (25% of which will be tax free), you must do so at the time of purchase. Please talk to your provider for more information about these options.

  • Your income will also be affected by the annuity rates at the time you buy your annuity.

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

  • Annuities are a guarantee of an income for life, therefore the rates they're based on change as life expectancy increases. The younger you are when you retire, the longer you are likely to have in retirement and the longer your annuity is likely to be paid to you. For this reason, you will generally get a lower income if you are 60 than if you are 70 when you buy your annuity.

  • Your pension needs to provide you with an income for the rest of your life. If your income doesn't increase over time, inflation could reduce what it can buy in the future.

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