When you come to retire you have the option of buying an annuity with your pension savings. An annuity is an insurance product which converts your pot into a regular income that you’ll get for the rest of your life.

There are alternatives to buying an annuity. These include an ARF and AMRF where your fund remains invested and you can draw down income from it as required. But an annuity is the most common method of arranging retirement income. So let’s take a look at how to buy one.

Get a benchmark quote

Before you retire your pension provider should send you a pack which will tell you how much you have in your pot and the different types of annuities available. You don’t have to stick with that provider. You have the right to buy your annuity from any provider.

Find the perfect annuity fit

Annuities come in all sorts of shapes and sizes. Choosing the right annuity depends on your own personal circumstances. Here are some common annuity products that you might want to get quotes for:

A single-life annuity will provide you with a fixed regular payment until you die and provides the highest starting figure but after you die payments stop so if you have a partner or dependents they won’t get anything.

With a joint-life annuity some or all of your income is paid to your partner or dependants after you die. Because of this guarantee the income pay-out is less.

A guaranteed annuity only pays an income for a certain time, in most cases up to ten years. If you die during the guarantee period income is paid to your dependants or can be converted into a lump sum and inherited along with the rest of your estate.

You can protect the income you receive from being eroded by inflation with an escalating annuity

An unhealthy lifestyle or medical conditions like cancer can boost your income thanks to an enhanced annuity. That’s because these factors can reduce your life expectancy meaning your pension fund doesn’t have to stretch so far. So in some cases income can be higher than with a regular annuity.

Getting advice

Since there’s no going back you might want to seek out some advice. A Financial Broker can provide you with independent financial advice and can assess your situation, explain your options and recommend a product.