Purchase an Annuity
After taking your tax-free lump sum, you can use the balance of your pension fund to purchase an annuity from a pension company. An Annuity is a guaranteed income (pension) for the rest of your life. Purchasing an annuity can provide you with security of income during retirement.
Annuity options include:
- Level – Your pension is fixed at the outset and does not increase each year.
- Increasing – Your pension increases each year by a fixed amount e.g. 3% per annum.
- Guaranteed Period Pension – Annuities can have different guaranteed periods (normally 5 and 10 years). In the event that you die within the guaranteed period, the remaining pension payments (within the guaranteed period) will be paid to your estate in a lump sum.
- Single or Dependents (Joint) Pension – A Single Annuity pays you an annuity for your lifetime. A Joint Annuity pays a percentage of your annuity to your spouse/civil partner or dependent when you die for their lifetime.
Pension/Annuity Payments are subject to Income Tax at your marginal rate and USC deductions under the PAYE systems.
Some older pension plans offer Guaranteed Annuity Rates at retirement. These rates are often much more generous than annuity rates currently available on the open market. We can advise you if your pension plan offers these valuable Guaranteed Annuity Rates.
You can choose to purchase your annuity from any pension company. You are not obliged to purchase an annuity from your existing pension company. As independent financial advisers, we will provide you with personalised quotations based on your individual details as the pension income from different companies may be higher or lower than that offered by your existing pension company.