What is an annuity?

An annuity is a contract between an insurance company and a pension scheme member in which an insurance company provides a regular income in exchange for a lump sum.

The amount that you are paid as part of your regular income is dependent on the insurer's estimation of how long you will live, the annuity rates, and the amount of your pension fund.

What are the advantages?

• Provision of a regular income upon retirement
• Choice of annuities available to suit your needs - Joint life annuities available
• Income paid at intervals to meet your needs

The advantages and benefits will depend upon the type of annuity you select. We are here to assist and to ensure that you get the one that best meets your needs and circumstances.

What are the disadvantages?

• Lower rates on annuities for women, due to increased expected life span. However, from 21 December 2012 insurers have not been able to discriminate between male and female annuity rates based on sex alone following a ruling by the ECJ on 1 March 2011 - although rates based on postal codes (where they live) may continue
• Falling annuity rates could reduce the amount that you receive from your pension
• Not very flexible, and unless you have selected a flexible scheme, you could be tied to the policy
• Payments cease on death unless you have selected a spouse pension or guarantee.

The disadvantages will also depend upon the type of annuity you select. We are here to assist and to ensure that you get the one that best meets your needs and circumstances.

Important note

If you do decide to buy an annuity upon retirement, you should ensure that you check policies, rates, restrictions, and benefits very carefully, and if necessary seek advice from an independent financial adviser. Investing in the wrong annuity scheme could cost you a great deal in annual income, so make sure that you look into this subject carefully before you make any commitment.

A pension is a long term investment. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The value of your investment and income from it is not guaranteed it can go down as well as up due to fluctuations in investment markets, and you may not get back the full amount invested.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.