Frequently asked questions
Do I have to buy an annuity?
No. There are other options for taking an income from your pension, including drawdown.
An annuity is usually regarded as the safest option though, because it provides you a guaranteed income.
What happens to my annuity when I die?
If you decide to buy a single life annuity, with no additional guarantees or options, the annuity income will stop when you die. However, there are several options you can choose at the outset to make sure your income continues to be paid to your loved ones after you’re gone.
Do I have to take tax-free cash from my pension?
You don’t have to take any tax-free cash – instead you can use your whole pension for your annuity. This means you’ll get a higher income, but this will be subject to income tax.
If you decide not to take tax-free cash, you can’t take it at a later date.
Can I change my mind once I've bought an annuity?
Providers may offer a short cooling-off period where you can cancel. But after that, once you have purchased an annuity you cannot normally cancel it, change to a different provider or get your money back.
Therefore it’s important you consider your options and choices carefully and seek professional financial advice if you are uncertain of the suitability of an annuity, or any investment, for your circumstances.
The cooling-off period will be confirmed in the annuity providers’ key features documents, which will be included with your application, or can be requested earlier.
How safe is my annuity?
Annuities are provided by insurance companies and offer a secure income for the rest of your life.
The annuity providers on our panel and Hargreaves Lansdown are covered by the Financial Services Compensation Scheme (FSCS). You may be entitled to compensation from the FSCS if Hargreaves Lansdown or your annuity provider cannot meet their obligations. This will depend on the circumstances of your claim.
Eligible claimants are able to make a claim to the FSCS where a provider is unable to (or likely to be unable to) meet claims against it, e.g. it has insufficient assets to make payments. The FSCS would initially look to transfer the annuity to another provider or, if this is not possible, obtain a substitute annuity within the compensation limits. If this is not possible the policyholder will receive compensation under the FSCS. The compensation is 100% of the value of the claim with no upper limit. Further details of the FSCS can be found at www.fscs.org.uk or you can contact them on 0800 678 1100.
What is a benefit crystallisation event?
When you buy an annuity before 75, the amount of your pension you use and any tax-free cash you take will be measured against the pension lifetime allowance. This measurement is called a benefit crystallisation event (BCE).
Your pension could also be measured against the lifetime allowance at other times. For example, when you move pension money into drawdown, when you take a lump sum and/or when you turn 75.
If the money you've used for your annuity takes you over the lifetime allowance, there will be a charge. The lifetime allowance is currently set at £1,030,000 (2018/19).
Buying an annuity
How long does it take to arrange an annuity?
How long your application takes will depend on how quickly your pension provider moves your pension money to your annuity provider. Some can take two or three weeks but sometimes it can take longer. We’ll speak to your provider on a regular basis and make sure everything is moving along.
Where can I buy an annuity?
Your pension provider will usually send you an annuity quote just before you reach your retirement age. But you don’t have to take your annuity from your current provider.
You can take an annuity from any provider. And you’ll probably find a better deal that way too.
You can use our online annuity service to get quotes from the UK's leading annuity providers. If you find a quote that you’re happy with, contact us and we'll explain how to proceed. Quotes from us are free and there’s no obligation.
Can I get a higher income by providing details about my health and lifestyle?
Last year, more than half of our annuity clients qualified for a higher income by simply providing their health and lifestyle details.
You don’t have to be ill to qualify, you could qualify by just confirming your height and weight.
Is my annuity rate guaranteed?
So long as the annuity provider receives your pension money and all outstanding requirements within the quote expiry period the agreed rate will not change. It could change if the transfer doesn't complete in the expiry period. We’ll write to you to ask what you wish to do if the final annuity rate is lower.