Types of annuity - your options

Annuities range from the conventional, where you are guaranteed a fixed income for life - to options that aim to provide a growing income and a way to potentially reduce the effects of inflation.  

Pension Annuities   

With pension annuities (sometimes called compulsory purchase annuities), your personal pension fund, stakeholder pension fund or employer's pension scheme is usually used to buy an annuity to provide an income for life.  The income received is treated as earned income and is taxable under the PAYE system.

It is crucial that you research what each provider can do to maximise your income - Bank of Scotland Annuity Service can do this for you and look at all the options on your behalf.  

Types of Pension Annuities

• Conventional - invested in gilts and corporate bonds and pays a fixed return
• Enhanced/Impaired - pays a higher income if you have a qualifying illness
• With profit annuity - provides opportunity for income growth that's smoothed out  over the long term with a minimum income guarantee.  Income can go down as well as up.
• Unit linked - provides opportunity for growth by investing on the stock market. Income is not guaranteed and can go down as well as up.
• Flexible - a flexible annuity gives a secure income for life with potential for growth
• Single Life - gives retirement income throughout your lifetime but provides no income for dependants when you die.
• Joint life - gives a retirement income to your spouse or partner if you die first.

Purchased Life Annuities

With a Purchased Life Annuity you don't have to use a pension fund to buy your retirement annuity.  For example you may have an inheritance or cash sum from a property sale available.  The income you get is usually less compared with a pension annuity, however the tax treatment is more favourable.  This area of annuities is complex and we recommend you contact us for guidance. 

Other options

There are other options to consider.  We recommend you speak to a financial planning expert at Bank of Scotland Investment Service if you require advice - call 0870 121 4899.