Do you need a financial adviser to buy an annuity?
An annuity converts pension money into guaranteed income. Advice is not always required, but the decision can be difficult to reverse and shopping around matters.
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What is an annuity?
An annuity is one way to turn defined contribution pension savings into guaranteed retirement income. Other options include drawdown and taking pension money as lump sums.
Check existing pension guarantees first
MoneyHelper recommends checking whether an existing pension includes a guaranteed annuity rate. A valuable guarantee could provide more income than a new annuity available on the open market.
When might advice help?
Advice can be useful where you need to compare annuity income with drawdown, decide how much pension to annuitise, coordinate several pension pots or understand how the choice fits a spouse or household plan.
Do not automatically accept the current provider's offer
Shopping around can matter because different providers and product features can produce different income levels. Health and lifestyle information can also affect some annuity quotations.
Decide what the guaranteed income needs to do
An annuity quote depends on the features chosen, not just the pension amount. Ask whether income is for one life or continues for another person, whether it stays level or increases, and what guarantees or protection apply after death. These choices affect the initial income offered.
Start with the spending that needs dependable support and the income already expected from other sources. A larger starting payment is not automatically preferable if the selected features leave a partner exposed or reduce purchasing power over time.
Check whether an existing pension contains a guaranteed annuity rate or other protected feature before moving or using it. The provider should explain the conditions under which that benefit applies. A current open-market quote is not the whole comparison if an existing guarantee has been overlooked.
Make quotes genuinely comparable
Give each provider or adviser consistent information about the pension, chosen features and relevant health or lifestyle circumstances. Differences in the information supplied can produce differences in quotes that have little to do with value.
Ask whether the service searches the relevant market, provides a personal recommendation or only arranges the product you select. Understand the fee or commission and whether it is reflected in the quoted outcome. A brokered quotation and regulated personal advice can involve different responsibilities.
As an illustration, a higher single-life level income and a lower joint-life increasing income are not competing prices for the same product. The second includes different protections. Decide which features need assessing before comparing the headline payments.
Understand the commitment before proceeding
Annuities commonly involve a lasting exchange of pension capital for the agreed income. Check the specific cancellation rights and what can or cannot change after the arrangement is established. Do not assume you can later switch features as easily as changing an investment fund.
Ask how tax is handled, when payments begin and how the arrangement fits alongside other pensions. If only part of your pension is being used, identify the plan for the remainder and any ongoing charges or advice responsibilities.
Advice can be useful where the decision interacts with health, dependants, different pension types or other assets. Guidance and comparison tools can help you understand the options, but they do not establish which combination is suitable for your household.
Sources and further reading
MoneyHelper - Annuities explained ↗
MoneyHelper - Find a retirement adviser ↗
MoneyHelper: comparing guaranteed retirement income ↗
