Buying an annuity
You can buy your annuity from an insurance company of your choice. If you do not choose an insurance company, the Trustee will do so on your behalf. The cost of an annuity varies depending on your age, gender, interest rates and life expectancy at the time you take your benefits. It also depends on the type of annuity you choose (see common options below). You may also have the option of purchasing your pension annuity from the UKRF.
The amount of pension you will receive at retirement will depend on:
- The value of your Accumulated Fund (made up of contributions, investment returns less any tax-free cash taken).
- The type of annuity you choose.
The most common options when choosing your annuity are:
- Pension increases – annual increases to your pension to offset the effects of inflation (e.g. 3%, 5% or in line with the Retail Prices Index (RPI)).
- Partner’s pension – a pension payable on your death and the level of that pension (e.g. half or two-thirds of your own pension).
- A guarantee that your pension will be paid for at least five years (so if you die within five years of taking your benefits, the balance of five years’ payments is paid to your dependants as a lump sum).