Free Annuity Comparison

If you want a pension to go to your spouse/partner when you die then you can provide for them. However, the amount of initial pension you get will go down. If you die your pension can continue to be paid to your spouse/partner at the same level (100%) or a reduced amount (typically 66% or 50% of your pension).

Single Life

If you choose this option the income is paid throughout your life only. When you die, the income will cease. The income you will receive each year from a single life annuity will be higher than a joint life annuity.

Joint Life

If you are married or have a partner one of the decisions you have to make is whether you want them to continue to receive an income should you die before them. If you do, you should think about choosing an annuity on a joint life basis. This means that after your death, your surviving partner will receive an income for the rest of their life. A spouse's pension may be less important to you if your spouse or partner has adequate retirement income of their own.

The percentage shows the amount from the maximum. Based on a healthy male, aged 60, £50,000 non-protected rights fund, with a wife aged 57.
Source: The Exchange 21 June 2005

• You can choose what percentage of your retirement income will continue to be paid to your spouse or partner on your death. For instance, you could opt for the pension to continue in its entirety to your spouse (100% spouse's pension).
• Alternatively, you could choose the pension to reduce by half (a 50% spouse's pension), or a third (66.66% spouse's pension).
• The greater the spouse's pension, the lower the initial income will be. A pension may be provided to a partner if they are financially dependent on you.

If you have protected rights and are married, you must select a 50% spouse's income.

If you want the pension/income to increase each year then you can do this. However, once again the amount of pension you will receive initially will be lower than one which does not increase. It is possible to choose the level of increase at the outset and the most common levels of increase are 3%, 5%, and RPI linked (inflation).

This is generally considered an expensive option because of the impact on your starting income. It can take many years before you 'break even'.

Non-increasing

If you select an income that does not increase, you will generally receive a much higher initial income than an annuity that does increase. However you should bear in mind that, as time goes by, the real value of your income will be eroded by the effects of inflation.

Increases (Fixed or Inflation?)

If you are worried about the effect inflation may have on your retirement income, you can choose for your income to move in line with the Retail Prices Index (RPI) which means your income will keep track with inflation and therefore retain its buying power.

The retail price index inflation was 3% for the 12 months ending May 2006. It takes 14 years for the 3% increasing pension (£2,210) to reach the level annuity (£3,185). You have had less money for the first 14 years and it takes a total of 25 years to break even.

The percentage shows the amount from the maximum. Based on a healthy male, aged 60, £50,000 non-protected rights fund, with a wife aged 57
Source: The Exchange 21 June 2006

You can also choose a fixed percentage increase each year such as 3% or 5%.

All annuities will pay out for at least the whole of your life. However, you can also choose for your income to be guaranteed for a minimum period of time (usually 5 or 10 years), even if you were to die before then. This means if you die before the end of the guarantee period, the remaining payments left under the guarantee will be paid to your estate or the person or people you have nominated in your Will, if you have made one.

• A guarantee period may be less important to you if you have chosen a joint life annuity.
• If you have 'protected rights' you may only select either no guarantee or a 5 years guarantee period.

The percentage shows the amount from the maximum. Based on a healthy male, aged 60, £50,00 non-protected rights fund, with a wife aged 57
Source: The Exchange 21 June 2006

You can also choose a fixed percentage increase each year such as 3% or 5%.

• You can choose for your annuity to be paid monthly, quarterly, half yearly or annually.
• You can also choose whether you have it paid in advance or in arrears.
• In advance – you receive your first payment straight away,
• in arrears – you wait until the end of the payment period. In arrears will be a higher income than in advance as there is one less payment up front.