Types of annuity

Many people opt to buy a conventional (or 'guaranteed') annuity, because they pay a fixed rate of income from the outset for the rest of your life.

• You'll know exactly how much you'll get because your income is guaranteed to remain the same for life.
• Your income will not be affected by changes in the stock market.

• As your income will remain 'level', the purchasing power of your pension income will be eroded by inflation over time.
• Once selected, it cannot be changed.

As its name suggests, this is a conventional annuity where the income changes in line with the Retail Prices Index (RPI), or by a fixed amount (typically 3%) each year.

• You'll have a guaranteed income for the rest of your life.
• Your income will change in line with the RPI or by the fixed rate chosen. This may help keep pace with or even exceed inflation.

• Selecting an increase will lower your starting income when compared to a level income.
• If you choose a fixed percentage increase, your income may still be eroded by inflation over time.
• If you choose an annuity that increases in line with the RPI and inflation is negative, your income may go down (unless you choose to protect against this).
• Once selected, it cannot be changed.

A with-profits annuity, such as our Income Choice Annuity, pays you a regular income for life, based on the performance of a linked with-profits fund. Assuming investment returns are good your income may increase and over the longer term this could give you some protection against inflation.

• Guarantees to pay an income for life that won't fall below a minimum level.
• Growth potential for your income based mainly on the performance of the with-profits fund, which may keep pace with or even outpace inflation.
• Some, like our Income Choice Annuity, allow you the flexibility to convert to a conventional annuity with level or increasing income if you change your mind.

• While there is potential for growth your income can go down in years of poor fund performance, although never below a minimum guaranteed income level.

This type of annuity links your retirement income to the value of an underlying investment fund. The fund can be low, medium or high risk, depending on what is offered by the provider.

• Potential for increases in income, based on fund performance.
• Potential to keep pace with or even outpace inflation.
• Some allow you to convert to a different type of annuity if you change your mind.

• Your income can fall.
• There may be no minimum guaranteed income in years of poor performance.
• This is the highest risk annuity option.
• This is a complex product and you should seek financial advice if you want to find out more. There may be a charge for financial advice.

You might like to find out more about our annuities, including our new With-Profits Pension Annuity - the Income Choice Annuity.

Additionally, if you have an illness, condition or lifestyle habit that may shorten your life expectancy, you could benefit by purchasing your annuity on 'enhanced' or 'impaired life' terms. Our Guaranteed and Income Choice Annuities are all able to be 'enhanced'.