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Annuity options explained

Choose your income, payments and death benefits

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Annuity income options

An annuity payment can stay the same or increase each year. Increases will mean you start with less, but your income will be better protected from inflation. When choosing which option is right for you, you should keep in mind how your spending might change in retirement and how inflation increases prices over time.

  • Level income


    You will receive the same amount of income each year. This could mean the buying power of your income is reduced over time because of inflation. For example, over the past 30 years the price of goods and services has roughly doubled. Goods and services costing £10 in 1993 would now cost you £20.39.
  • Increasing income


    You can choose for your income to increase each year by a certain percentage. Typically, this is by 3% or 5%, but other options may be available.
  • Income that tracks inflation


    Your income will move in line with the Retail Price Index (RPI). This means your income will retain its buying power by tracking inflation.

Annuity payment options

You can choose to receive your annuity income every month, every three months, every six months or once a year. You can also choose when in your chosen period you’ll receive it.

Paid in advance

You’ll receive your first payment immediately after your annuity is set up. And then at the frequency you’ve chosen. For example, on that date every month.

Paid in arrears

Once your annuity is set up, you’ll receive your payments at the end of your chosen payment period. For example, in 6 months’ time and every 6 months after that.

Annuity death benefit options

You could choose an annuity beneficiary payout option which will pay your annuity income to your loved ones when you die, potentially tax free.

Single life

Your annuity income will pay for the rest of your life, but will stop when you die.

Joint life

You choose how much of your annuity income would continue to be paid to your beneficiary (usually your spouse or partner) if you pass away first. For example, it could be 50%, 66% or 100% of your income. The higher the proportion, the lower your annual income will be.

Guarantee periods

Your income is paid for your lifetime, and is also guaranteed to pay for a minimum length of time. If you die within this time, the income will be paid to your estate or your beneficiaries for the rest of the guarantee period. Guarantee periods of up to 30 years are available. The longer guarantee period you choose, the less income you’ll receive initially but it could mean more is paid out overall.

Value protection

Value protected annuities return the original amount you used to buy the annuity, less any income paid, to your beneficiaries. Your annual income will be lower if you choose this option. But it means that at least all the money you used to buy the annuity will be paid out, no matter what.

If you’d like value protected quotes, call us on 0117 980 9940.

Tax rules change and benefits depend on individual circumstances. The tax treatment of payments after death changes depending on your age when you die. Visit our what happens to your pension when you die page to learn more.

Get an annuity quote

It's free to get a quote and will only take a few minutes with our annuity calculator. All you need to do is answer some questions about yourself and your pension. Make sure you add your health and lifestyle details, it could mean you get thousands more in income across your lifetime. Annuity rates change regularly, and quotes are guaranteed for a limited time.

Get an annuity quote Log in to see your saved quotes

Annuity FAQs

Annuity essentials

Annuity vs. drawdown: or can I have both?

We discuss and reveal how you could combine options to benefit from security and flexibility.

Read article

How much do you know about annuities?

Take this quick quiz to test your annuity knowledge.



Question 1

You have to be at least 65 to access your pension and buy an annuity. True or False?

You can usually access your pension from age 55 (rising to 57 from 2028). You might be able to access your pension sooner if you have a protected retirement age or you're unable to carry out your occupation due to ill health.

Question 2

Up to 25% of your pension can normally be paid to you as a tax-free lump sum before buying an annuity. True or false?

You can normally take up to 25% of your pension as an initial tax-free lump sum. The rest can then be exchanged for a secure lifetime income, which (like all income from your pension) is taxable.

You don’t have to access all of your pension in one go. It’s possible to stagger the process, meaning you can take your tax-free cash in stages too. Tax rules can change and any benefits will depend on your circumstances.

Question 3

Your existing pension provider will always give you the best possible rate. True or false?

Your existing pension provider might not offer you the best rate, so it’s vital you shop around and make sure you’re getting the best deal possible.

You can check what your current provider offers, and if any special guarantees apply, by contacting them. Then take the time to compare their rates against the whole market. Just follow the link at the end of this quiz to compare annuity quotes.

You should remember, once set up, an annuity can’t normally be changed. Annuity rates also fluctuate, so what could be seen as a bad rate today could be a great one in years to come and vice versa.

Question 4

Having a health condition means you could get less for your money. True or false?

In most cases, disclosing health conditions and lifestyle factors could mean you qualify for an enhanced annuity and get a higher income. Last year, nearly 9 out of 10 HL annuity clients qualified. Even common conditions like high cholesterol or blood pressure could make a difference, as could your weight, alcohol consumption and whether you smoke.

Question 5

When you die the income from your annuity will always stop. True or false?

There are options you can build into your annuity which mean your income could continue to your partner or a beneficiary when you die. This will mean your yearly income is reduced, but could mean more income is paid out overall. You'll need to select these options when you apply, and can't change your mind later on.

Our guide to annuities explains the options in more detail – simply follow the link at the end of this quiz to get your copy.

Question 6

You can ask for your annuity income to increase in line with inflation. True or false?

You can choose to get the same amount of income each year, or have an income which increases (either by a set percentage each year or in line with inflation). You'll need to select this option when you apply, and can't change your mind later on. Asking for your income to increase will reduce your initial income, but could protect your annuity’s buying power in the future.

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Download your guide to learn more about the benefits and risks of annuities and the different options you can select. You can also get an annuity quote to see how much income you could get and compare different providers.

Compare annuity quotes

Looks like annuity facts aren't your forte - yet.

Download your guide to learn more about the benefits and risks of annuities and the different options you can select. You can also get an annuity quote to see how much income you could get and compare different providers.

Compare annuity quotes

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Download your guide to learn more about the benefits and risks of annuities and the different options you can select. You can also get an annuity quote to see how much income you could get and compare different providers.

Compare annuity quotes

Guidance, help and advice

Guidance from Pension Wise

Pension Wise is a free, impartial government service for anyone aged 50 or over, with a UK based personal or workplace pension.

It can help you understand what type of pension you have, how you can access your savings and the potential tax implications of each option. But it isn’t financial advice.

More about Pension Wise

Have a question?

Our UK-based helpdesk are here for you six days a week. Our friendly and knowledgeable team are ready to answer your questions no matter how big or small.

Call us on 0117 980 9940.

Opening hours
Monday - Friday: 8am - 5pm
Saturday: 9.30am - 12.30pm

Alternatively, view our annuity FAQs.

Book a callback

Retirement Advice from HL

Not sure if an annuity is right for you? Our financial advisers can give advice on your pension options and work with you to:

  • Feel confident about when and how to take your pension
  • Match all your investments to your personal goals and income strategy
  • Help you plan for later life and Inheritance Tax

Discover retirement advice

Retirement Advice from HL

Not sure if an annuity is right for you? Our financial advisers can give advice on your pension options and work with you to:

  • Feel confident about when and how to take your pension
  • Match all your investments to your personal goals and income strategy
  • Help you plan for later life and Inheritance Tax

Discover retirement advice