There are other ways such as Drawdown but here we highlight what an annuity is and the different types. In order to decide which one will suit your own circumstances, it’s imperative that you speak to a financial adviser.
An annuity is effectively giving your pot of pension money to an annuity provider who will turn this into an income for the rest of your life. It is important that you seek advice as your pension provider will give you an option to take the annuity from them. Invariably this will be lower than can be found elsewhere.
There are various types of pension annuities. In addition to the below, if you have certain medical or lifestyle conditions you may be able eligible to receive a higher income.
These will give you a set guaranteed income which can’t change however over time the income will be eroded by inflation.
Guaranteed income which will increase each year in an attempt to keep pace with inflation. The starting level will be considerably lower when compared to a level income annuity.
These are not guaranteed and can fluctuate depending on fund performance. They have the potential to keep pace or outperform inflation. They are higher risk than conventional annuities but can provide better returns.
These can provide guarantees and whilst they are ultimately dependant on fund performance they can be flexible to cater for different risk categories.