When you want to turn your pension pot into a regular pension income, buying an annuity used to be the standard option but it is no longer a requirement, and sales of annuities fell in the first year of the 'freedom and choice' policy (2016).
An annuity is a pension you buy from an insurance company. You hand over your pension fund to them and in return they pay you a regular pension until you die (and – if you have chosen a joint annuity – your surviving dependant too).
Annuities can vary a great deal between companies. Not only can they work in different ways, they can also vary in how much pension they provide for the same pension pot. You are entitled to shop around for the annuity that best suits you and provides the best value. This is known as the Open Market Option (OMO).
You should always consider whether you could get better value elsewhere before accepting an annuity from your pension provider. The Money Advice Service outlines the options available, including its retirement income options tool, while Citizens Advice also provides an explanation of annuities.