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Annuities FAQs

Do I qualify?

Yes, provided you have a pension plan and are over 55. You are not obliged to turn your pension pot into an annuity if you are a member of a ‘final salary scheme’ or ‘defined benefit scheme’.


Which is better – the Open Market Option (OMO) or staying with my current provider?

OMO is your right to find the best annuity rate. Because you do not have to take the annuity that your current pension provider offers you, it is good advice to shop around for a quotation because you will almost certainly find a better deal.


When is the best time to convert my pension into an annuity?

If you delay taking out an annuity, you may miss out on retirement  income that you would have received if you had taken it out earlier. Equally, however, you should    ensure that you are getting the best annuity rate available, bearing in mind that the market changes on a daily basis.


What are the different types of annuities, and which are available to me?

There are a number of different types of annuities. Which ones are available to you can depend on your own objectives and circumstances. Click here for more information on different types of annuities.


Should I know how much is in my pension pot?

Yes, because your current pension provider should have sent you a letter stating your ’fund value’. If the total adds up to less than £18,000, it may be possible to take your entire pension as a lump sum (see below).


Does the size of my pension pot affect my annuity?

Yes it does. The more money you have saved in your pot, the higher your retirement income.


Does the Stock Market affect my annuity rate?

Dependent on where your pension fund is invested it can do. Also, Annuity rates fluctuate in the short term. They are generally moving downward because people are living longer. Rates declined by 20% between 1997 and 2007 but could go up again if interest rates or bond yields increase.


What is the tax-free lump sum pension payment and when can I get it?

From age 55, you can take 25% of your pension as a tax-free, cash lump sum, this is known as a Pension Commencement Lump Sum, and receive an income form the balance even if you decide not to stop work yet. The rest of the pension pot will buy your annuity.

A pension pot under £18,000 may be treated under ‘Triviality’ rules. If you are between 60 and 75, you could take your entire pension pot as a lump sum. There are tax implications to this, and which pensions qualify differs depending upon size. We suggest you use our form to obtain a free annuity quotation from an independent IFA.


Will the fact that I smoke or have health issues affect my annuity rate?

Possibly. You may qualify for an Enhanced Annuity, which increases your retirement income. This is because the annuity providers believe that your life expectancy may be lower and will hence pay your annuity for a shorter period.


Are annuities different for men and women?

No, they are the same now.


Does where I live affect my annuity?

Yes, often it does matter. Some areas have lower life expectancies then others – something you cannot do anything about.

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Annuities Explained

What they are, how they work and why it makes good sense to shop around.

What are the costs of delay in converting your personal pension to an annuity?