Most of us who have built a pension pot will be faced with a decision – when we decide to retire – as to how best withdraw funds from the pension fund we have accumulated. One option is to use part of the fund to buy an annuity.

A pension annuity is basically a financial product that pays you an income for the rest of your life, no matter how long you live.

Effectively, you transfer part of your pension pot to an annuity provider – usually, an insurance company – who will then pay you on a regular basis an income, an annuity.

It's worth considering the following facts when discussing your options with a qualified pension’s adviser.

• Once agreed the terms of your annuity cannot be changed.
• A pension annuity cannot be cashed in or surrendered.
• The income you receive from your annuity is taxable.
• Depending how long you live you may or may not receive in cumulative annuity payments, the full amount you surrendered when you first set up the annuity.

Discuss your options with your pension’s adviser when you are ready to consider retirement, they may be able to suggest alternatives to an annuity.

Source: New feed