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Annuities FAQs


Are there different types of annuity?

You can choose a number of different annuity products from a variety of providers available in the market. These include ranging from conventional annuities, enhanced or impaired annuities and investment- linked annuities. These different types of annuity offer different features and benefits, so it’s important to research your options and compare the different annuities available before you decide what' is right for you.

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Can I get a better annuity rate if I suffer from an illness?

People with certain illnesses could qualify for higher annuity payments through impaired or enhanced annuities. Those with heart problems, diabetes, cancer or other ailments may qualify for these annuities.

Applicants will need to disclose their medical history to the annuity provider and await their decision. An annuity provider will then relate illness to life expectancy and determine what payments they can provide.

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Do I have to take an annuity?

Those about to retire don't necessarily need to take an annuity, as some can take monies directly from their pension.

However, annuities present a secure option for maintaining a steady income during retirement. You should consider the pros and cons of setting up an annuity plan carefully. If you decide against an annuity, we would suggest seeking independent financial advice for your retirement.

You don’t have to start using your retirement income the day you retire. Government regulations no longer state you have to buy your pension annuity by the time you turn 75, although keeping your funds in a pension pot after this time may result in some tax charges. If you do decide to delay taking your pension income, you may be able to save more into your pension fund and thus have a larger pot when you do want to cash it in. As a general rule. the oldlater you are when you come to retire, the more income you'll get.

You don’t have to buy a single annuity either; if you have £100,000 in your pension fund you could purchase four annuities for £25,000 each.

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Do I have to take my pension's tax-free lump sum?

No. Some choose to take up to 25 per cent of their pension as a tax-free sum, but you can also choose to direct your whole pension pot to your annuity.

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How can I find financial advice for pensions and annuities?

Confused.com does not offer financial advice, but for some options we suggest you seek out the help of independent advisers. Confused.com's customer support team can help you find an adviser should you require one.

Call 0800 1181 660 or email customersupport@confusedannuities.com.

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How is the income from my annuity calculated?

The amount you receive from your annuity provider will depend on the amount you have saved into your pension (and the specifically the sum you use to purchase your annuity)., Your age, and gender, and where you live, and whether you choose to take any tax -free lump sums at the point you retire (and if so how much) also factor in. The type of annuity you choose will also play a part as the number of features and benefits you opt for will affect your return.

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How long does it take to set up an annuity?

Once you have found an annuity to meet your needs, we will help arrange it for you.

Typically, the amount of time the process takes depends on how quickly your pension provider transfers funds to the annuity provider. While this can take anywhere from a few days to three months' time, the average transaction takes about 30 days.

The process also depends on whether the pensions or annuities provider uses a manual or electronic system. At Confused.com, we strive to make the process as quickly as possible and to keep you updated on its progress.

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How much does our annuity service cost?

You can learn all about the cost of our annuity service by reading our Key Facts of our Services document.

While we do not charge any up-front fees for our annuity service, a commission will be paid by the provider you select for your annuity. Any amounts paid to us will be shown on the quotes you receive through Confused.com.

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How safe is an annuity?

Conventional, impaired and enhanced annuities comprise some of the safest financial products available. Providers of annuities keep funds of millions of pounds on hand to ensure your annuity payments. The Prudential Regulation Authority mandates the amount providers must keep to secure annuities.

Should the unthinkable happen and your annuity provider failed, the Financial Compensation Scheme exists to guarantee up to 90 per cent of your annuity. The policies of the FSCS on annuities can be subject to change, so visit www.fscs.org.uk to learn the latest.

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Should I stick with my current pension provider for an annuity?

Even if your employer has set up an annuity for you already, you can always compare other providers for the best offers to boost your income during retirement. This 'Open Market' option (meaning you can compare the market on annuities) helps you find annuities which meet meeting your specific needs.

Confused.com can help you to explore your options by helps people explore their options through comparing annuity quotes using through our online annuity planner.

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What can I do if my medical history's incomplete?

Since your medical history's important to annuity providers, you should always provide as much as you can. If you have trouble remembering your medical history or don't know what option to choose, you should contact one of our annuity coordinators.

Contact one of our coordinators to see how to proceed with your annuity application.

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What does an 'open market option' mean?

Having an open market option means you're not tied to one provider for your annuity. You can seek out annuities from multiple providers in the market to find the best deal.

Annuity rates can vary widely between providers and they'll change depending on what options you choose. Comparing annuities online can help you find the best annuity rates for a number of options quickly. This could help you to increase your income during retirement.

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What is a conventional annuity?

The most common type of annuity, a conventional annuity, will help provide a stable income through your retirement. Conventional annuities use your pension fund and investments to ensure dependable payment during retirement while you're retired.

These annuities have a number of options to choose from, such as pay period and adjustments for inflation.

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What is a fixed-rate annuity?

A fixed-rate annuity secures a payment of a particular amount for the duration of your retirement. This can differ from other types of annuities, which may scale your payments to match inflation.

Fixed annuities generally begin with significantly larger payment amounts for those who choose them. Visit our page on fixed annuities for more information.

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What is an alternatively secured pension?

A specialised type of drawdown pension for over-75s, alternatively secured pensions have been abolished in the UK as of April 2011.

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What is an enhanced annuity?

Enhanced annuities cater specifically to the needs of retirees with certain medical conditions. Subject to the approval of your annuity provider, you may qualify for an enhanced income. This type of annuity may apply to those with heart conditions, diabetes or other recurring ailments. See our enhanced annuities page for further information.

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What is an immediate annuity?

Immediate annuities provide a quick turnaround from investment to payment of your annuity. While annuities sums might be held for some time before distribution, an immediate annuity works by beginning payments faster, generally within a year of the agreement.

See our dedicated page on for immediate annuities for more details.

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What is an impaired annuity?

An impaired annuity can give you increased payments for your retirement, much like enhanced annuities.

Impaired annuities still provide payment for the duration of your retirement, but qualification will be subject to a review of medical history. Those with serious forms of cancer, heart problems, diabetes or other ailments often qualify for impaired annuities.

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What is an income drawdown?

A income drawdown allows a person to withdraw funds from their pension pot while keeping the rest invested. Also known as a pension fund withdrawal, drawdown pension, capped drawdown or unsecured pension, it allows you to hold off purchasing an annuity.

Drawdown pensions also involve a certain level of risk for the policy takers. You could take a drawdown pension waiting for annuity rates to rise, but if you withdraw funds and annuity rates fall, you could be left with significantly less income for retirement.

Before taking a drawdown pension option over annuities, we would suggest seeking the guidance of a professional financial adviser.

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What is an investment-linked annuity?

Investment-linked annuities tie your annuity payments to the performance of an investment made using your pension pot where your pension gets invested. This means your annuity payments could increase dramatically, though a poor performance could reduce them. Investment-linked annuities usually, however, have a set minimum for payments.

Currently, Confused.com does not compare investment-linked annuities on its website.

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What is an purchased life annuity?

While conventional annuities generally draw on your whole pension pot, purchased life annuities do not. A purchased life annuity will generally be funded by personal savings, an inheritance or other lump sum.

Purchased life annuities will often be regulated differently than conventional annuities, especially in taxation. Confused.com currently doesn't compare purchased life annuities.

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What kind of income can I expect with an annuity?

Regular annuity payments will vary between offerings and depending on the annuity you choose on the options you select. Your personal health and location may also affect how much you receive get under the plan. Use our online annuity planner to find annuity quotes from or a range of different programmes providers.

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What will the maximum payment of an annuity be?

Maximum values of pensions are determined by the government and are referred to as the Lifetime Allowance. The amount sat at £1.8 million for the 2010/11 and 2011/12 tax years, after which tax penalties incur. Benefits from pensions will generally be compared to the Lifetime Allowance and shown as the percentage of this allowance used thereof.

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Do all workers need to buy an annuity?

Some employers provide annuities or similar programmes along with employee pensions. However, it can always help to shop around and compare annuity quotes to find the best deal for your money.

You should also ask your employer what type of scheme your pension falls under, as you may be responsible for purchasing your own annuity.

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What's the difference between annuity providers?

Annuity rates can vary greatly between annuity providers. In addition, some carriers specialise in certain areas for providing income. We recommend comparing providers to see where their strengths lie.

Not all annuity providers will have the same features for their offerings either. See our guide to annuities to get an overview of what options and differences you might find.

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When should I plan for an annuity?

Planning for your retirement should begin well in advance of your actual retirement. You should consider your total pension and how much it would provide at its present value. Then you can work out how much income you would have using our online annuity planner and decide whether you need to start setting aside more funds.

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Where can I buy an annuity?

Many insurance providers and financial organisations offer options for annuities. With so many options, it can help to have a centralised comparison site to view quotes from different providers. Using our Online Annuity Planner , you can quickly compare many different annuity providers to find your best option.

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Why do annuity providers require medical information?

Annuity providers use your medical history to approximate the length of your annuity agreement. This could also affect the size of the payments you'll receive in your annuity.

If your medical history indicates you may have a shorter life expectancy, you may qualify for impaired or enhanced annuities. This makes it important for you to accurately complete all questions on your medical history when comparing annuities.

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Will an annuity take up my entire pension amount?

No. You can decide how much of your pension fund to use in buying an annuity. Typically the monthly income amount provided from your annuity will reflect the purchase price paid,. So for example, if you spend more on a specific annuity, the monthly income should will increase.

You can buy a number of different annuities if you want to split your pension pot with different providers, or different annuity types. Also, Usually retirees are usually allowed to take up to 25 per cent of their pension as tax-free cash. Additionally, those receiving pensions of less than a fixed amount (£18,000 for 2011/12) can opt to take the whole amount as cash.

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Will I be able to change my annuity plan?

When you've officially signed up to an annuity plan, you will not be able to change the options on it. Also, you cannot change to a different annuity plan once you've agreed to another.

After you have chosen the right annuity option that is right for you and completed the purchase you aren’t won't be able to change your decision (unless it i's still during a set the cooling- off period).

This means it's very important to ensure you've thoroughly researched your needs for an annuity provider as well as your own projected income requirements throughout retirement. Compare annuity plans to help you find the best deal before deciding.

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Will I get a better annuity rate if I'm a smoker?

Users of tobacco products Smokers should disclose their habits when requesting an annuity quote. Some smokers of tobacco users may quality for enhanced annuities, based on their lifestyle and medical history.

As smokers may be more predisposed to certain ailments than the average person, they could qualify for an enhanced annuity. These annuities often offer bigger payments for retirees.

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Will my health affect my annuity plan?

Your health record can affect your annuity in many ways, but most importantly your health will help to determine in which annuity plan is best will be right for you. Certain medical conditions or a shorter life expectancy could qualify you for an enhanced or impaired annuity. These types of annuity, which are based on your individual circumstances, could offer you an increased return on your retirement income.

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Will my partner receive annuity payments after I die?

Annuities do not provide for partners as a standard; payments will simply stop. However, you can set up your own annuity to provide for your partner upon your death.

Joint annuities cater specifically to those wishing to provide for their partners after their death. Options such as the guarantee period or value protection ensure a minimum time or amount of payment for an annuity.

If you're unsure of your annuity options, consult our guide to annuities for an overview.

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