Annuities

There are a number of options available to you, including an annuity and an unsecured pension (USP). There is no longer a maximum age limit for purchasing an annuity, as long as you are aged 55 or over.

No. You are likely to find a higher income by exercising your ‘Open Market Option’ and purchasing your annuity through an alternative provider. If you have received a quotation from your current provider, we can compare this for you against the rest of the market, free of charge.


NB. This only applies to money purchase schemes. If income derives from a final salary scheme, this may not be an option.

Any income from an annuity or unsecured pension is treated as earned income and normal UK tax rules apply.

No. You may be able to transfer all of your pension funds into one existing pension and then an annuity can be purchased from the combined funds. You can also transfer all of your funds into just one Self Invested Personal Pension (SIPP) for unsecured pension purposes.

‘Protected Rights’ are the value of any benefits built up as a result of redirecting your national insurance contributions to contract out of the State Earnings Related Pension Scheme or State Second Pension.

‘Non-Protected Rights’ are the value of any benefits from contributions you or your employer have made directly into your pension fund.
The main difference is that any annuity purchased from ‘Protected Rights’ must be on a joint life basis if you are married, and must provide a reduced income for your spouse in the event of your death.

When you purchase an annuity, you exchange your capital amount or pension fund for regular income payments for the rest of your life. In the event of your death, unless you have opted for a guarantee period or spouse’s pension, your money is absorbed by your annuity provider and no further payments will be made. When opting for an unsecured pension (USP), you invest your capital and take an income direct from the fund itself by way of ‘cash withdrawals’. In the event of your death, the value of your USP can be paid to your partner, dependant or even a charity.

You can purchase an annuity anytime from the age of 55, although there may be early retirement penalties depending on your pension provider.

Unsecured pension allows you to take your tax free cash and have the remainder of your pension fund invested in a Self Invested Personal Pension (SIPP), until such time as you decide to draw an income or purchase an annuity.

There are a number of options available to you, when setting up your annuity. If you do not select any of these options, your annuity payments will not continue in the event of your death.

1. Guaranteed Payment Period
You can normally select a guaranteed period of up to 10 years, during which time; if you die your annuity will be paid to your estate and therefore any dependents for the remainder of the guarantee period.

2. Joint Life
You can opt for a joint life annuity, where a proportion of your annuity income will continue to be paid to your spouse for the remainder of their life.

3. Value Protection
Should you die before age 75, any amount remaining after deducting the total gross income you have received in annuity payments from the original fund value used to purchase your annuity, will be paid to your estate. This ‘Value Protection’ payment is subject to a 55% tax charge.

This depends largely on your current pension provider and how quickly they transfer your pension fund to your new annuity provider. Setting up an annuity typically takes between 6 to 8 weeks.

If the total of all your pension funds (including any that are already in payment), is below £18,000 (from tax year 6th April 2010), before taking any tax free cash, then under ‘Triviality’ rules, you can take this all as a lump sum from age 60. You can take 25% as tax free cash and the remainder is subject to income tax at your highest marginal rate.

The information that iGO4 and THEACH provides is completely without obligation to do business with us and is completely free of charge.
If you decide to proceed with any of the offers we make to you, iGO4 and THEACH will be paid a commission amount from the provider you choose for your Annuity, this amount is shown to you on the quotation from your chosen provider. This will be at no cost to you.

This is an annuity that is purchased with a lump sum that is not from a pension fund.

We operate on a non-advised basis, which means that we do not give advice, just thorough and factual information, in order for you to make your own informed choice.
If you would like advice, we can provide you with details of external Independent Financial Advisers and refer you to them, upon request.