What kinds of annuities are there?

Annuities provide a great deal of choice about how they are structured. You can choose to

• take the same amount of cash every year – so the value of your pension will be higher at first but it will buy less in future as inflation eats into it
• have the pension rise in value each year – either a fixed amount or tied in some way to the cost of living
• have an investment-linked annuity that can go up or down depending on its investments
• have a guaranteed period (often five years) so your full pension is paid for this period to your surviving dependents even if you die first
• provide survivor's benefits (or not)
• provide a range of levels of survivor's benefits

Of course you have to pay to protect your dependants or secure guarantees against future inflation. You do this by getting a smaller pension at first.

If you have a medical condition, smoke or are overweight, you may be able to get a better annuity rate as your life expectancy will not be as great.

You can download a very helpful guide to your choices from the Pensions Regulator’s website.

And on the TPAS site you can find an online planner to help you consider what type of annuity you want.