Annuity is the technical name for what most people traditionally think of as their pension, in other words the money paid to you when you're retired.
Taking an annuity is just one of the ways to fund your retirement. The next sections set out three alternatives - phased retirement and income drawdown before age 75 or alternatively secured pension at age 75 - and you can get further details of the options on offer from the Financial Services Authority's (FSA's) leaflet on annuities and income withdrawal.
You can buy an annuity from AEGON Scottish Equitable even if your pension plan is with another company - this is known as the open market option.
Regular guaranteed income
An annuity is a regular guaranteed income paid for the rest of your life that you buy with some or all of your pension fund. Once set up, an annuity plan will pay you the same amount of money each year. This can help you plan for the future, as you know exactly how much you'll have each year but it may not always offer you the flexibility that you need.
You can set up your annuity to:
- just pay you a pension
- pay a pension to you and also to your husband, wife, civil partner or to any children
- have pension payments that increase each year to cover increases in the cost of living
Choosing additional benefits for your annuity will reduce the amount of pension you get paid, but means that your family will continue to benefit from this income after your death.
The amount of pension you receive depends on the annuity rates as the time you buy, your age, sex and your health. Once you've bought an annuity, you can't vary the amount of the payments it makes to you, so it pays to shop around for the best rates. Your financial adviser can help with this or you can consult the FSA's website for the annuity rate tables or further information on annuities.
Phased Retirement
Phased retirement is almost like a number of mini-retirements spread out over a period of time to suit your individual needs.
Further information... Who should I talk to?
Speak to your financial adviser to find out more. If you don't have an adviser, the IFA Promotion Service or the Society of Financial Advisers can help you find one.
