Annuity frequently asked questions
Listed below is a list of commonly asked questions – with simple explanations and useful links to areas within this site and external sites.
Annuities, health and enhanced rates
Some illnesses do mean you qualify for an enhanced annuity rate. These are called “enhanced” and "impaired" annuities.
Providers will often relate any illness to your life expectancy and if the illness may cause a reduction in your life expectancy when compared to the average, some specialist providers may offer more income than is available from a standard annuity.
If you smoke cigarettes, cigars or tobacco regularly, you need to disclose this when requesting a quotation as this may qualify you to an 'enhanced' annuity rate.
Because your life expectancy may be reduced when compared to the average, some specialist providers may offer more income than is available from a standard annuity.
Yes – in fact by having certain medical conditions you may qualify for an enhanced or impaired annuity that pays higher rates to people who may have a lower than average life expectancy.
If you aren’t sure of the option to choose or can’t remember all of your medical history then make sure you explain to one of our annuity co-ordinators - they can help ensure you submit the right information.
Annuity providers use your medical information (and any dependant's medical information if relevant) as part of their quoting process.
This is due to them estimating how many years they believe they will be paying out for.
If you have a shorter life expectancy, they may be able to offer you an increased level of income. All medical information may be cross-referenced with your medical records when the annuity is set up so it’s important to be accurate when completing this information.
Arranging an annuity
Once you have decided on your annuity and the options you want included, we then help you arrange it.
A delay could be caused by how quickly your pension provider can transfer your pension to the annuity provider - processing time for this is usually around 4-6 weeks, but this could be significantly longer depending on what systems the provider uses.
We use our expertise to ensure this is done as quickly as possible and that you are kept regularly updated.
Conventional annuities or enhanced/impaired annuities are very safe financial products.
The industry regulators - the Financial Conduct Authority and Prudential Regulatory Authority - require providers of annuities to keep large amounts of capital aside to ensure that they are able to meet their current and future financial obligations.
If the worst were to happen and an annuity provider was to fail then the Financial Services Compensation Scheme will guarantee to protect 100% of the value of your annuity - though this may change. You can check the latest position at www.fscs.org.uk.
Costs of our service
Full details of our terms of business are provided in the 'Key Facts of our Services' document, which you should read.
We do not charge an upfront fee for our services or for the provision of information; however, we will be paid commission by the provider you select for your annuity.
Any commission payable to us is illustrated on the quotations you receive.
General annuity questions
Once you have bought a conventional annuity (which includes enhanced or impaired life annuities), you can’t transfer it to another annuity, change the options you selected at outset or change to another provider.
It is therefore important to consider your options carefully before buying an annuity.
No - you don’t. You can often obtain an improved income in retirement if you shop around.
This process is known as taking an 'Open Market Option'. Shopping around will show you the variations in annuity rates. You can then compare this with the annuity rate offered by your existing pension provider to see whether it compares favourably.
No - you are usually able to take up to 25% of your pension fund as a tax-free cash lump sum if you want (though you will have to pay tax on the remainder of your pension). You can also choose to split your pension between a number of products – such as an annuity, a drawdown product and cash sums. All have different benefits and risks and so it’s important to research your options.
Our quick income builder can show you how combining products and options may work.
Deciding which provider to select is often driven by the income you receive and the features of the products offered.
Some providers only offer certain benefits, while others don’t.
The ability for you to shop around and buy an annuity from any annuity provider, not just the company that provides your pension. This option enables you to search for the best annuity rate for you.
By shopping around, rather than staying with your pension provider, you could find you receive considerably more income in retirement.
When you die your annuity simply stops and your partner will not receive any money when you die, unless you have chosen options within your annuity that specifically provide for them.
There are several ways to do this including a joint annuity, guarantee period and value protection.