Know your choices at retirement
Understand annuities, drawdown, and lump sums - and how to combine them for a suitable retirement income plan.
1 Nov 2024 | 7 min read
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Buying an annuity: step by step
The four steps to buying an annuity, why shopping around matters, and what to check before you commit.
1. Find out what you have
Before comparing quotes, gather up-to-date valuations for every pension you hold. It's worth checking each one for valuable guarantees before you go any further, since some older pensions include features that are difficult or impossible to find elsewhere.
In particular, look for a Guaranteed Annuity Rate (GAR) or a Guaranteed Minimum Pension (GMP). These can pay significantly more than current market rates, and would usually be lost if you transferred that pension elsewhere.
Gather up-to-date valuations from every pension you hold
Check for a Guaranteed Annuity Rate (GAR) or Guaranteed Minimum Pension (GMP)
Check for transfer penalties or a Market Value Reduction (MVR) before moving anything
2. Consider your options
An annuity isn't a single product - it's a set of choices. You can decide between a lifetime or fixed-term annuity, single or joint life, level or escalating income, and how much (if any) death benefit protection to add.
Each choice trades off against your starting income, so it's worth understanding the options before you start comparing quotes rather than after.
Lifetime vs fixed-term, single vs joint life, level vs escalating income
Each option trades off against your starting income
An adviser can model each combination against your circumstances
3. Get whole-of-market quotes
Around 60% of people don't shop around before buying an annuity, often accepting their existing pension provider's offer without comparing it to the rest of the market. Doing so can mean missing out on a meaningfully higher income.
Health and lifestyle factors matter too. Smokers and people with certain health conditions can qualify for an enhanced annuity, sometimes increasing income by 40% or more - but only specialist providers offer these rates, so a whole-of-market search really counts.
60% of people don't shop around - comparing the whole market can increase your income
Health and lifestyle factors can increase income by 40% or more through an enhanced annuity
Only some providers specialise in enhanced rates - a full market search matters
4. Get guidance and complete the paperwork
Before you commit to a quote, check it carefully. Confirm whether any special terms, a Guaranteed Annuity Rate (GAR), or a Guaranteed Minimum Pension (GMP) apply to the pension you're moving from, and check for transfer penalties or a Market Value Reduction (MVR).
A dedicated adviser and administrator can handle this checking and the paperwork on your behalf, from requesting information out of your existing provider through to setting up your new annuity.
Check for special terms, GAR, or GMP before accepting any quote
Check for transfer penalties or a Market Value Reduction (MVR)
A dedicated adviser and administrator can handle the paperwork for you
Other Guides
More resources to help you plan your retirement
What is an annuity, and do I need one?
How annuities work, how the guarantee is backed, and how to decide if one is right for your retirement income.
20 Nov 2024 | 5 min read
Annuity options: configuring your income
Death benefits, guarantee periods, payment frequency and escalation - the choices that shape your annuity income.
22 Nov 2024 | 6 min read
FAQs
Common questions about buying an annuity