Annuities are one of the most secure ways to access money from your pension. You’ll get a guaranteed income for life, meaning you don’t have to worry about it running out.
There are lots of different factors that could impact how much income you could get, so you need to make sure you fully understand your options before making a decision.
Take this quick quiz to test your annuity knowledge.
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.
Up to 25% of your pension can normally be paid to you as a 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.
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.
Having a health condition means you could get less for your money. True or false?
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.
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.
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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What you do with your pension is an important decision. This quiz, our guide and the quotes you might request aren’t personal advice. We strongly recommend you understand your options and check that the option you choose is right for your circumstances. Take advice or seek guidance if you’re unsure.
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