How much will an annuity give me?
How much income could I take from my pension?
Depending on the type of annuity you choose, your retirement income could be influenced by a number of factors. These include the size of your pension fund and the performance of its underlying investments, your age and state of health, your lifestyle choices and even your location. This is why annuity calculators like ours can be so helpful when you are seeking an income from your pension.
Enhanced annuities and other features
Your choice of annuity could significantly affect how much income you get in retirement. For example, an enhanced annuity takes your life expectancy into account when calculating your income rate and could pay you more if you have a health condition or take prescribed medicine. Your income could also be affected by any extra features you choose, like securing your income for a minimum guaranteed period or opting for a lump sum to be paid to your beneficiaries after you die.
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Unlike flexi-access drawdown which gives you total control over how much money you take, with an annuity you get a set income rate for the rest of your life. Plus, once you have bought an annuity you cannot usually change your mind (but this is expected to change from the April 2017 tax year). This means it is important to shop around between different providers, either by using an annuity calculator or applying directly, in order to find the most income for your individual circumstances.
More information on buying an annuity
Do I pay tax on income from an annuity?
Just like any other income, annuity payments are taxed at your usual rate of Income Tax. If you have other sources of income, or are only using one part of your pension to purchase an annuity with the remainder accessible through income drawdown, then before making a decision you could benefit from discussing your circumstances and requirements with a financial planner.
Download one of our free pension guides
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come. Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise. Find out more about Pension Wise.