Test your annuities knowledge with our readiness checklist

It’s National Annuity Day (21 October) — the perfect time to check how ready you are to make confident decisions about your retirement income.

Our investment experts have created a short Annuity Readiness Checklist to help you understand how annuities work and why they matter.

???? Take the test now

Want to share this checklist with clients or friends? Download our leave-behind version here. 

What is an annuity?

An annuity is a way to turn your pension savings into a guaranteed income for life. You pay a lump sum from your pension (or other savings) to an insurance company, and in return you receive a regular income — usually monthly.

After the State Pension, an annuity is one of the most reliable ways to secure income that keeps coming, no matter how long you live. Some annuities even increase each year to help offset inflation.

Why annuities matter

Most people in retirement want stability — an income they can count on. That’s exactly what an annuity provides.

In fact, annuity rates are at their highest level in 16 years, making now a good time to explore your options.

Whether you’re approaching retirement or already drawing an income, understanding annuities helps you:

• Balance security and flexibility
• Protect against inflation
• Make the most of your pension savings.

Take the annuity readiness test

Read each statement below and decide if it’s true or false. Score yourself 1 point for every TRUE statement.

1. Annuities pay a secure guaranteed income

2. Annuity rates (the level of income paid) have reached their highest level in 16 years

3. You can move from drawdown to buying an annuity at any age

4. Annuity rates are currently paying around 6%. The estimated drawdown rate for many people is around 4%

5. You could use all of your pension savings to buy an annuity or just some of it

6. Annuity can be bought using pension savings and other savings, such as those in a bank account or ISA

7. You can shop around for an annuity, like you do your car or house insurance

8. Shopping around nearly always results in more income than the offer made by your existing pension provider

9. Income can be paid for a set term, e.g. 5 years, or for life

10. Enhanced income is available to those:

      • Living in deprived areas

      • Who drink and smoke

      • Who are overweight

      • Who have specific disabilities and/or illnesses
     

11. People who have common health issues such as diabetes or heart conditions may qualify for enhanced annuities

12. Income could continue to be paid after your death

13. A lump sum could be paid after your death

14. In 2023 the most popular annuity selected paid level income for life. These people are starting to discover their buying power is decreasing due to inflation

15. State pension plus an annuity with inflation protection is a sensible way to cover essential household spending for the rest of your life

16. Widows of certain military awards can receive an enhanced annuity

17. Periodically paid personal injury damages paid by way of an annuity, in certain circumstances, are exempt from tax

What's your score?

Every statement is true!

If you scored 17/17, you’re well on your way to annuity confidence!

If some of these surprised you, take a few minutes to explore your options.

• Visit moneyhelper.org.uk/en/pensions-and-retirement — a free, impartial, government-backed service that can help you see how much annuity income your savings could buy; or
• Take a look at Defaqto Star rated Pension and Investment products.