Transcript

Before 2015 when pension rules were changed, most people converted their pension savings into a guaranteed income for life by buying an annuity with their pension pot. Now there are other options, but many people still choose an annuity as a way of protecting against financial uncertainty. Annuities can offer peace of mind as they provide a secure regular income.

You can split your pension pot. So if you want to, you can just use part of your retirement savings to buy an annuity so that you do get some secure income, perhaps to cover your basic expenses, like your bills. Remember, an annuity is a guaranteed income for life, no matter how long you live.

However, you need to be sure on the choices you make. You can't change your mind once your annuity has started, and you can't cash it in.

Unlike other financial products, with an annuity disclosing health conditions can help you get a better rate if these conditions may affect your expected lifespan. And this can apply to lifestyle choices too, such as drinking and smoking. Your pension provider may offer an annuity or another retirement product but remember their rates might not be the best. So shop around and see who can offer you the highest income.

The income you're offered will depend on how much is in your pot, your age-- the younger you are, the lower the income offered will be. How much you decide to take as a tax-free lump sum-- you can have up to 25%. Whether you include extras features, such as protection against inflation or providing an income for a partner or spouse after your death.

Your health, lifestyle, and occupational history-- this could help you get a better rate. Also current rates and the state of the economy.

An alternative to an annuity is to opt for a guaranteed income for a fixed time period. This option might be a tax efficient way to take retirement income. These products pay a regular amount for an agreed time, and some also offer a lump sum at the end. This can be useful as a bridge to a future date when another source of income starts.

Whichever option you choose, do you remember that your pension is liable to income tax. And do you bear in mind that when you opt for an annuity or another guaranteed income product, it's a one-off decision that you can't change. So take your time to make sure it's the right decision for you.