This guide is for you if you’re approaching retirement and have a pension fund with which to buy a lifetime annuity. You can find useful information you’ll need to be familiar with, so you can make an informed decision about your retirement income.
If you’re reading this, it’s likely you’re close to retiring. It’s a special time in anyone’s life - and a chance to do those things you never had the time to do before. So it’s essential you think and plan
carefully - as the decisions you take now cannot be undone.
From the age of 55, anyone that’s saved into a pension can decide when and how to take an income during retirement, and since it determines your income for the rest of your life, it’s not a decision that should be taken lightly.
Whilst your pension fund will be used to provide you with a retirement income, most pension schemes allow you to take a tax-free cash lump sum of up to 25% of the value of your pension fund. You can use it however you like - maybe pay off the mortgage, clear some debts, or invest it. Alternatively, you don’t have to take this cash lump sum payment, or you can choose to take a proportion of this - it’s up to you.
You can use the remaining fund to provide an income for your lifetime.
The majority of people retiring take their income via an annuity, but an annuity is only one of your income options at retirement.
Nationwide offers conventional and enhanced lifetime annuities - the kind that tend to be chosen by most people. Very simply, a lifetime annuity is a way of transforming your pension pot into a guaranteed income for the rest of your life. You can choose various options to ensure your lifetime annuity suits your particular needs.
How much income you get depends on a number of factors such as the size of your pension pot, the annuity rates available, and also a number of factors that determine your life expectancy e.g.:
The income you receive from the annuity is taxable in much the same way as earned income.
Depending on your lifestyle or whether you have a health risk, you may be entitled to what’s called an ‘enhanced annuity’. This pays an income for life in the same way as a conventional lifetime annuity. However, it pays a higher income because annuity providers assume you are likely to have a shorter life expectancy.
It’s important to make the most of your hard earned pension and with annuity rates varying between providers, it is essential that you shop around to get the highest income possible. The Nationwide Annuity Service is designed to help you do this.
Please note: You will need to have minimum total pension pots of £18,000 or more to use the Nationwide Annuity Service. If it is less than £18,000, you can find out about your options at the Money Advice Service.