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.