An introduction to pension annuities

Most individual pensions do not normally start paying you an income when you retire. Instead you can choose when to start taking the income from your pension between age 55 (50 until 2010) and 75.

Part of your pension can normally be taken as a tax-free lump sum. Most people can take 25% of the fund tax-free. The remainder can then be converted into an annuity which then pays you a taxable income for the rest of your life.

Annuities are provided by insurance companies. The company that you choose promises to pay you a regular income in exchange for your pension fund, no matter how long you live.

Once set up, the basis of your annuity is fixed and offers a secure income. You can rest safe in the knowledge that your income will never run out. However, because the income is fixed it is important to choose your options carefully, as once it is set up you cannot change your mind.

Why shop around?

There are two very important points to consider when setting up an annuity:

• You rarely have to stay with your existing pension provider when you retire and often they will not offer you the best income.
• Not all annuity providers are equal. The difference between the best and worst annuity incomes can be significant.

The Hargreaves Lansdown Annuity Supermarket is designed to help you get one of the most competitive incomes possible from your pension plans. Shopping around in this way is known as using the open market option.

Our Annuity Supermarket makes it quick and easy to find a competitive retirement income and has already helped thousands of people get a significantly higher income for life.