What is a pension annuity?
A pension annuity converts the funds built up in a pension scheme, into a regular income. The income is payable for the rest of your life and will be subject to income tax.
If you're lucky enough to be in a salary related ('defined benefit') scheme then the chances are your scheme will provide you with your pension income.
However, if you're in a money purchase ('defined contribution') scheme then you will need to buy a pension annuity to provide you with your pension income.
Do I have to buy a pension annuity from my current pension provider?
In the majority of cases you won't have to buy your pension annuity with the same provider you have your pension scheme with. You can shop around as not all providers offer the same pension annuity products and each calculates their own annuity rates. Shopping around for your annuity (commonly referred to as taking the Open Market Option) could enable you to obtain a larger pension income.
How will I know what to do?
Assuming you’re not looking to take your pension benefits early, your existing provider should write to you no later than four months before your selected retirement date detailing the options available. You can then request an illustration to get an idea of what benefits you could expect if you were to buy your pension annuity with them.
The illustration will also give you the value of the pension fund if you were to take the Open Market Option. You can then contact other pension annuity providers to get a comparative quote to see what they can offer you.
Where a Final Salary scheme does not provide a pension income direct from the scheme, the Trustees of the scheme may instead purchase an annuity on behalf of the scheme, to pay your income.
If you are at all uncertain about what to do, then we recommend you speak to a financial adviser.
Do I need to stop working before buying a pension annuity?
No, you don’t have to stop working to start taking your pension benefits. However, if you're in a company pension you may need to check what the scheme rules will allow. The earliest you can normally buy a pension annuity from is age 55.
What should I think about before buying a pension annuity?
Buying a pension annuity is a very important decision, not least because once you've bought it you can't change your mind.
You need to be sure that what you're buying is right for you, as you may need to rely on the income it provides you with for many years to come.
Because of the importance, you may wish to speak to a financial adviser.
Can I buy a pension annuity without going through a financial adviser?
Yes, if you know that you want an annuity then call the Saga Annuity Service on 0800 046 2872*. One of the team will be able to provide you with a quote and, where appropriate, an application pack. It would be helpful, but not essential, if you have details of your pension provider and pension amounts when you call.
What types of annuity does the Saga Annuity Service provide?
The Saga Annuity Service offers a Pension Annuity with enhanced rates available.
A pension annuity will pay you an income for the rest of your life, the level of which is worked out when you buy it. Once you have purchased a pension annuity it will not be affected by what happens, for example, to the stock market or by changes in the housing market.
What is an enhanced annuity?
An enhanced annuity is a pension annuity benefitting from improved annuity rates and therefore offering a larger pension income. If you suffer or have suffered certain lifestyle health risks then you may qualify for extra income.
Do I need to have a minimum pension fund to buy a Saga annuity?
Yes. The minimum pension fund we will accept is £1,000 (after payment of any tax-free lump sum).
What happens if I change my mind?
If you apply for a Saga Pension Annuity, you have 30 days from the date you signed the application form to change your mind. After the 30 days have passed, you won't beable to cancel or change your annuity payments.
Will I have to pay tax on my income?
Your annuity income will be added to any other taxable income and taxed at the highest rate applicable.
Where will my income be paid?
Your income will normally be paid into your UK bank or building society account. You must be named as either the account holder or joint account holder. All payments will be made in British pounds sterling (GBP).
Arrangements can be made for payments to an overseas account if requested, but there will be a charge for converting your payment from sterling to the required currency. The charge will be deducted from each payment instalment.
Why should I choose to buy my annuity with the Saga Annuity Service?
The Saga Annuity Service offers you access to a pension annuity available at competitive rates. It includes a range of annuity features and payment options and an experienced team to help you through the process of buying your annuity. Call now for your no obligation quotation on 0800 046 2872*. Lines are open 9am-5pm Monday to Friday. Calls may be monitored and recorded for security and training purposes.
* Call charges will vary.