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Annuity pros and cons banner

pros and cons

In a nutshell

An annuity pays a guaranteed income for life. In exchange for some or all of the money in your pension, you’ll get a regular income for as long as you live.

But, the downside to this security is a lack of flexibility. Even if your circumstances change you can’t normally cancel or amend your annuity. So you should think carefully before you go ahead.

The pros

  • Your income is guaranteed. It doesn’t matter what happens to the markets, or if you live until 110, your income will be paid for life.
  • You can choose options so your income increases. This means your income’s buying power could keep up with inflation.
  • Your income could continue after you die if you’ve chosen certain options when you get quotes and apply.

The cons

  • Normally you can’t change your options if your circumstances change.
  • You can’t cash in your annuity.
  • Annuity rates might rise in the future, but you won’t benefit from this if your annuity is already being paid.

The different annuity options

When you set up an annuity, you have the freedom to choose:

  • Whether your income increases over time, or stays the same
  • How often you receive your income
  • What happens to your annuity after you’re gone

Once your annuity is set up, you can’t normally change your mind. So it’s important you consider your options carefully before you get started.

More about annuity options

Win 1 of 5 £185 Fortnum & Mason hampers

This summer, be in with a chance of winning a £185 Fortnum & Mason hamper. If you get a no-obligation annuity quote by 26 July 2022, we’ll automatically enter you into our hamper prize draw. You must be 55 or over to enter and get a quote. .

Get a quote and enter prize draw

Make sure you get the best rate

Your current pension provider is unlikely to offer you the best annuity rate, so it’s worth shopping around and getting quotes from other providers. Just make sure you won’t lose any guarantees or pay excessive exit fees before you switch. You can use our service to get quotes from annuity providers on the open market in one go.

Make sure you provide your health and lifestyle details when you apply. You could qualify for an enhanced annuity if you do. You don’t to be ill to qualify. In fact, last year more than half of our annuity clients qualified for a higher income.

Get quotes

Combining secure and flexible income

You don’t have to buy an annuity with all of your pension. You could secure an annuity with some of your pension and move the rest into drawdown.

That way, you could have enough guaranteed income to cover your essential bills and use drawdown to pay for life’s more enjoyable expenses.

Find out more

Guide to annuities

Take your time learning more about annuities with our Guide to annuities.

Download now

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