Types of Annuity

Current legislation stipulates that you must purchase an annuity with your personal pension or stakeholder pension funds by the time you reach 75. Usually you can take up to 25% of your pension fund as a tax-free lump sum, although the exact amount will depend on the type of pension that you have. Interestingly this has recently been renamed “Pension Commencement Lump Sum”, so whether or not the Exchequer has plans to removes the tax free status is open to conjecture.

It is usually a good idea to take the lump sum from a pension, although there are circumstances when it might be better not to if, for example, there are high guarantees on conversion to an annuity. Many people invest their tax-free cash elsewhere, either to provide a greater income or for capital growth.

There are different annuities to suit different needs. The main types are:-

• Level

• Escalating

• Investment linked

• Value Protected

Also, if you smoke or have ever had any sort of medical treatment, then you can have any of these options under an enhanced annuity. Why not take a few minutes to see if you might qualify?

Complete our enquiry form and download a FREE copy of our guide to annuities and the Financial Services Authority guide from their "Money Made Clear" series

For people with pension funds over £100,000, Unsecured Pension (USP) may be a viable alternative. Please follow this link to our main website for more information. Many new products have come to market designed to protect the value of people's pension income as they enjoy increasingly long lives.

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