Brian Mclean

Annuity Purchase is a traditional form of secure pension income which can provide guarantees for life. There is usually flexibility to have a single life annuity or to include a survivor's pension if required. The pension income can also be provided on a level basis or with escalating benefits for those who need protection against the effects of inflation. Despite being inflexible, this type of retirement income usually appeals to those who like the idea of a stable risk-free income although some of the modern annuity products offer the chance to have income linked to investment performance for those who wish to introduce some risk element to their pension provision.

Falling interest rates, poor stock market investment returns and greater life expectancy have seriously reduced annuity rates in recent times. However, it is important to remember that annuities can offer absolute security for as long as you live. No other pension product offers this guarantee and given that life expectancy continues to increase, this guarantee is a major consideration when choosing an appropriate pension product.

Most modern pensions now benefit from a feature called the 'open market option' (OMO) which allows you to buy an annuity from any company and not necessarily from the company that helped to build your retirement fund. This means that policyholders can 'shop around' for the best annuity rate to obtain the best pension level for your circumstances and an independent financial adviser can help to find the best rate available.

It is also possible to obtain better rates for those that have a significant medical condition which may affect life expectancy.