Annuity tips before you buy

You can shop around when the time comes to buy an annuity - this is called using 'the open market option'.

Choose carefully, as once you've bought your annuity and selected your options, you can't normally change your mind.

You don't have to purchase an annuity as soon as you retire, but you must normally do so before age 75. (The exception is if you have an 'Alternatively Secured Pension'.)

If you want to take any of your pension as a tax free cash lump sum (you can usually take up to 25%), you must do so at the time of purchase.

If all your pension savings total £18,000 or less, and you are aged between 60 and 75, you may be able to take all of this money as a partly taxable cash lump sum.

If you have a partner, consider buying your annuity on 'joint-life' terms, which will ensure an income continues to be paid if one of you dies.

If you and/or your partner (if you choose a joint-life annuity) have an illness, condition or lifestyle habit that may shorten your life expectancy, such as smoking, you may qualify for an 'enhanced' (impaired life) annuity. This normally pays a higher income.

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).

It's important that you seek advice on the type of annuity that is best suited to your circumstances. If you are in any doubt you should consult with your financial adviser.

Get answers to customers' most frequently asked annuity questions, or if it's jargon you're stuck on, you can refer to our glossary of useful terms at any time.