What is a Guaranteed Annuity?
When you retire, you need to make sure you have enough money to last the rest of your life. So, in return for some or all of your pension savings, a Guaranteed Annuity can pay you a secure, regular income for life, no matter how long you live.
A Guaranteed Annuity may be a sensible way of covering your fixed day-to-day living expenses in retirement, alongside your state pension and any other sources of income.
The downside is that, if you put all your money into a Guaranteed Annuity, you won’t have a 'nest egg' for unforeseen expenses (like paying for a new boiler or broken down car) or for treats (like holidays).
If you choose to purchase a Guaranteed Annuity within your Retirement Account, the income you receive will depend on a number of things including:
- The size of your pension fund used to buy the Guaranteed Annuity
- Your age and personal circumstances (for example where you live, your lifestyle or medical history)
You’ll need to choose how you’d like to receive your income, for example whether you want it to stay the same (level) or rise in line with inflation.
You’ll also need to decide if you wish to make provision for loved ones in the event of your death. This provision could be in the form of an ongoing income for the rest of their life or a lump sum or both.
You can also select how often income is paid – monthly, quarterly or yearly. Income will be paid in arrears – which means we’ll pay you at the end of your chosen period.
Once a Guaranteed Annuity has started, you won’t be able to change the amount of income, payment frequency or benefits.
The Retirement Account allows you to buy more Guaranteed Annuity whenever you want using any Pension Drawdown funds. You can also reinvest your Guaranteed Annuity payments into your Pension Drawdown fund. You may do this for tax planning purposes.