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Part 2 of the Annuity Buying Choices and Decisions (ABCD) series from Legal & General Buying a pension annuity is an important one-off decision. Once bought, it can’t be changed, so it’s worth taking the time to consider all available options and to do some research before buying. Decide when to buy The first decision to make is when to start receiving a pension income. An annuity can be bought from age 55 and anyone buying one can continue working if they want or need to. People may be offered their best annuity rates and income when delaying their purchase. Typically, older people are offered better rates because it is expected that they won’t be paid their income for as long. They’re also more likely to have lifestyle health risks or medical conditions that will qualify for enhanced annuity rates and income. Tax-free cash Before buying an annuity, most people will be entitled to take up to a quarter of their pension savings as a tax-free lump sum. Alternatively they can choose to use their entire pension fund to buy their annuity to increase their pension income. Financial advice Independent financial advisers (IFAs) can help annuity customers decide about taking their tax-free cash as well as helping them choose the annuity and options that best suit their individual circumstances. Many annuity providers will allow customers to buy direct from them if they choose not to buy through an adviser. Comparing income offers People don’t have to buy their annuity from their pension provider and as with any big purchase, it’s worth them shopping around because income offers can vary significantly. Standard rates, for people in good health when they buy, can vary by as much as 10%, whilst some annuity providers like Legal & General, offer enhanced annuity rates for people with certain health risks or medical conditions. For more serious conditions this could mean a difference to income of up to 40%. Choosing options Annuity customers have the opportunity to choose how they want their income paid before buying their annuity. They’ll also need to decide whether to add options like an income that increases or an income for their spouse or partner if they die before them. The options they choose will affect the level of income they’re offered.
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(B) Before buying an annuity
