What kinds of annuities are there?

Annuities provide a great deal of choice about how your retirement income is structured. You can choose to:

  • take the same amount of cash every year – so the value of your pension will be higher at first but it will buy less in future as inflation eats into it;
  • have the pension rise in value each year – either a fixed amount or tied in some way to the cost of living;
  • have an investment-linked annuity that can go up or down depending on its investments;
  • have a guaranteed period (often five years) so your full pension is paid for this period to your surviving dependants even if you die first;
  • provide survivor's benefits (or not); and
  • provide a range of levels of survivor's benefits.

Of course you have to pay to protect your dependants or secure guarantees against future inflation. You do this by getting a smaller pension at first. If you have a medical condition, smoke or are overweight, you may be able to get a better annuity rate as your life expectancy will not be as great.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.