Once you have decided that you wish to purchase a pension annuity, it is time to work out exactly which annuity suits your retirement needs. This will depends on your own needs and the needs of your family.
Pension Commencement Lump Sum
Many people choose to take a Pension Commencement Lump Sum and use the rest of their pension fund to purchase an annuity.
This block of cash is tax-free and can be spent, saved or invested as the policyholder sees fit.
Frequency of Annuity payments
Once you have worked out how much money remains with which to purchase your annuity, you can choose the frequency at which annuity income is paid.
Usually, pension annuity payments are made on a monthly, quarterly, half-yearly or annual basis. A monthly annuity payment is the most common way of receiving pension annuity, as most people prefer this to make budgeting easier, having always been paid on a monthly basis.
Timing of Annuity payments
If you would like your annuity payments to start as soon as your pension fund has been created you receive payments in Advance, whilst if payments start at the end of your payment term, these payments are In Arrears.
Annuity payments with or without proportion
If you receive your annuity payments in arrears, and die between two payment dates, with/without proportion describes how annuity payments are made. With Proportion payments are made as a proportion of your annuity, whilst Without Proportion means that last annuity payment before death will be the last.