Annuity

If you have a stakeholder pension, personal pension or money purchase scheme, then when you retire, or continue to work but decide to begin drawing your pension, you will probably need to purchase an annual pension called an annuity. If you are a member of a ‘Defined Benefit Scheme’, such as a Final Salary Scheme, then you will not need to purchase an annuity.

Upon your retirement, you will be entitled to a tax-free lump sum, up to the value of 25% of your total pension fund, and the remaining 75% can be used to secure a retirement income. Essentially, for personal pensions, you can sell your remaining pension fund (or your total pension fund, if you choose not to have a tax-free lump sum) to an insurance company, who will offer you an annual pension in exchange. You are effectively securing an annual retirement income using your pension fund as payment; this is known as purchasing an annuity.

To find out more about annuity rates and annuity options, please contact your PK Group Advisor today.  If you have not worked with us before, then please do get in touch and one our pensions specialists will be happy to assist.