What is an annuity?
An annuity is a retirement product that allows you to swap some, or all, of your pension for a regular income that’s guaranteed to be paid for life.
Annuities are provided by insurance companies, and how much income you get depends on a number of factors.
Unlike other retirement options, you don’t need to worry about how much to withdraw or what the stock markets are doing. Your income will be paid no matter what happens. You can buy an annuity any time from age 55 (rising to 57 from 2028).
How much tax do you pay on annuity income?
When using the money in your pension to buy an annuity, you can usually choose to have up to a quarter (25%) of the amount paid to you as a tax-free cash lump sum, and use the rest to buy the annuity. The annuity income you receive is taxed as earned income.
Pension and tax rules can change, and any benefits depend on your circumstances.
3
steps to
buying anannuity
Step 1
Get a free quote from all UK annuity providers on the open market
Use our online tool to see how much secure income you could get every year. Adding your health or lifestyle details could mean you get a higher income.
Step 2
If you're happy with your quote, call us on 0117 980 9940
The experts on our retirement helpdesk will check you're getting the best deal possible and send you your application. They're available Mon-Fri 8am-5pm. Or you can book a callback at a time that suits you.
Step 3
Complete and return your application
Once it's been processed, you'll receive your annuity income based on the options you selected when you applied.
Annuity quotes are only guarenteed for a limited period and rates will go up and down. Once you've bought an annuity, providers may offer a short cooling-off period. But after that, it cannot be changed or cancelled even if your circumstances change. Make sure you consider your options carefully.
Why use HL's annuity service?
- Get live quotes in minutes - Compare rates from all UK annuity providers on the open market. Your current pension provider is unlikely to offer you the best rate so it’s important you shop around to get the best deal.
- We’re award-winning - We've won over 200 awards, including Best Buy Pension 2023 from the Boring Money Awards.
- Ongoing support from a team of retirement experts - We've been helping UK investors for nearly 40 years.
- Trusted by over 1.8 million clients - We're a financially secure FTSE-listed company, regulated by the Financial Conduct Authority.
I’ve used HL for many years now. They helped me get a great deal on an inflation proofed annuity. I’d recommend them to anyone.
Factors that affect your annuity income
Many different factors will affect how much annuity income you get. They include:
- The size of your pension - The more of your pension you use to buy an annuity, the higher your income is likely to be. Although, you may not want to lock your entire pension into an annuity in one go.
- Annuity rates at the time you buy - Annuity rates determine how much income you could get. They change all the time because they’re linked to gilt yields. They’re also sensitive to interest rate changes.
- Your age, health and lifestyle details - You’ll tend to get a higher annuity income the older you are and if you disclose health and lifestyle details. Even confirming your height and weight could mean you get an enhanced rate.
- The type of annuity and features you choose - When you set up an annuity, you can choose for your income to increase over time, and to receive monthly or annual payments. You can also choose if your income should continue to your spouse when you die.
Balance security and flexibility
Throughout retirement it’s likely that your income needs will change, and you might want to access your pension income in different ways.
Combining your options could help you to find the right balance between a secure pension income and flexible withdrawals.
You could use the flexibility of drawdown to help you semi-retire or for your retirement nice-to-haves. A secure income from a final salary pension or an annuity can help cover essential costs. Using small portions of your pension to buy more than one annuity over time is worth considering as it helps you to shape your retirement as you get older.
Annuity FAQs
Annuity essentials
The impact of interest rates on pension annuity rates
We explain the positive impacts of increasing interest rates on pension annuities and how much secure income you could get.
How to make the most of annuities
Purchasing an annuity can help you de-risk your portfolio in retirement. Here we explore when you might consider an annuity, and how to get the best annuity rate.
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.
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.
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
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