Annuities Annuity options
Level-income annuities
Level annuities are the most popular type, probably because they offer the highest starting income, but they do leave you vulnerable to inflation. Remember that 4% rate of annual inflation will halve the buying power of an annuity in 18 years.
However, if you buy an annuity with protection against inflation, you'll have to accept a lower starting income. Though your income increases over time, it might be many years before it catches up with a level annuity.
| Yearly income from converting £10,000 pension into a level annuity | ||||
|---|---|---|---|---|
| Company | Smoker or all | No guarantee for a man aged 65 and a woman aged 62 | 10 year guarantee for a man aged 65 and a woman aged 62 | Enhanced/impaired |
| Aegon (Scottish Equitable) | All | £408 | £396 | Yes |
| Aviva | All | £480 | £468 | Yes |
| Canada Life Ltd | All | £504 | £492 | Yes |
| Just Retirement Ltd | Smoker Only | £528 | £516 | Yes |
| Legal & General | All | £516 | £504 | Yes |
| LV | Smoker Only | £528 | £516 | Yes |
| Partnership | Smoker Only | £504 | £492 | Yes |
| Prudential | All | £456 | £456 | Yes |
| Reliance Mutual | Smoker Only | £552 | £552 | No |
| Saga (provided by Legal & General) | All | £504 | £504 | Yes |
| Standard Life | All | £444 | £444 | No |
Using the table
The figures show yearly income for converting a £10,000 pension fund into an annuity. Rates correct at 20th February 2012 Rates shown are for conventional lifetime annuities
Level: This annuity pays the same amount every year
Smoker or all: All: annuity income is available to anybody,
Smoker: annuity income is available only to smokers. Annuity providers use different criteria to assess smoker rates
No guarantee: Your income dies with you (unless you've bought a joint-life annuity).
10 year guarantee: This ensures that if you die soon after retiring, your estate will continue to get your full income for 10 years after you retire
Enhanced/Impaired: Some providers will pay a higher annuity income than that shown in the table if you meet certain conditions. If this is based on your lifestyle or previous occupation, for example. These are called enhanced annuities . If you have certain illnesses or conditions that are likely to mean you have shorter life expectancy, these are called impaired life annuities
Source: The Money Advice Service; Postcode: SO22
Increasing income annuities
You probably need to think about your plans for retirement before deciding whether or not you want an increasing annuity.
Do you want to maximise your income during the early, healthiest years of your retirement, or do you want equal purchasing power over the years?
Your answers may depend on your health and how long you expect to live. If you have an existing medical condition, you may be able to get an even higher rate with an enhanced annuity.
| Yearly income from converting £10,000 pension fund into an annuity increasing by 3% | ||||
|---|---|---|---|---|
| Company | Smoker or all | No guarantee for a man aged 65 and a woman aged 62 | 10 year guarantee for a man aged 65 and a woman aged 62 | Enhanced/impaired |
| Aegon (Scottish Equitable) | All | £240 | £240 | Yes |
| Aviva | All | £336 | £324 | Yes |
| Canada Life | All | £336 | £324 | Yes |
| Just Retirement Ltd | Smoker Only | £372 | £372 | Yes |
| Legal & General | All | £360 | £348 | Yes |
| LV | Smoker Only | £360 | £360 | Yes |
| Partnership | Smoker Only | £348 | £336 | Yes |
| Prudential | All | £288 | £288 | Yes |
| Reliance Mutual | Smoker Only | £396 | £384 | Yes |
| Saga | All | £348 | £348 | Yes |
Table notes
Using the table
The figures show yearly income for converting a £10,000 pension fund into an annuity. Rates correct at 20th February 2012. Rates shown are for conventional lifetime annuities
Level: This annuity pays the same amount every year
Increasing: An annuity that rises every year - in this case by 3%
Smoker or all: All: annuity income is available to anybody,
Smoker: annuity income is available only to smokers. Annuity providers use different criteria to assess smoker rates
No guarantee: Your income dies with you (unless you've bought a joint-life annuity).
10 year guarantee: This ensures that if you die soon after retiring, your estate will continue to get your full income for 10 years after you retire
Enhanced/Impaired: Some providers will pay a higher annuity income than that shown in the table if you meet certain conditions. If this is based on your lifestyle or previous occupation, for example. These are called enhanced annuities . If you have certain illnesses or conditions that are likely to mean you have shorter life expectancy, these are called impaired life annuities
Source: The Money Advice Service Postcode: SO22
