Our With Profits Annuity can be bought with the proceeds of a UK registered pension scheme. It can also be bought using a one-off personal contribution paid either by your client or their employer.

Before buying one there are a number of decisions that need to be made. Your client will need to choose from a number of payment options, tell us how they want their income paid and select their Anticipated Bonus Rate (ABR). Income will be subject to income tax and will depend on their individual circumstances.

Each of the options they choose, including any optional death benefits added, will impact on the level of their starting and future income.

The payment options available from our With Profits Annuity are largely the same as those available from our Pension Annuity. There’s some additional flexibility after the annuity has started but the level of income could go up or down and income increases can’t be guaranteed.

Each option has a notional cost. These costs are taken into account when we calculate the starting level of income.

The options available to your client when buying their annuity are summarised below: 

1) What is their chosen ABR?

The ABR must be chosen from outset and can be between 0% and 4% (in multiples of 0.1%). The ABR is essentially an assumption on future annual bonuses that we will base the starting level of income on.

The lower the ABR, the lower the starting level of income but the more likely the income will increase in future years. This is because the bonuses we declare are more likely to exceed the chosen ABR in any given year.

The higher the ABR, the higher the starting level of income but the less likely our bonuses are to exceed the chosen ABR. The income is less likely to increase every year as a result.

2) How do they want their income to be paid?

Will the income be paid in advance or in arrears and how many instalments do they want each year? Instalments can be:

• yearly
• half-yearly
• quarterly
• monthly.

Yearly in arrears is the cheapest option and yearly in advance the most costly.

3) Do they want a final (partial) income instalment to be paid when they die?

This is only applicable where income is paid in arrears.

'With proportion’ is when a final pension payment will be made for the period between the last income instalment and the date they die.

If ’without proportion’ is chosen, then no final payment will be made. This is the cheaper of the two options.

4) Would they like to add a guaranteed payment period?

With Profits annuities will normally pay an income for life but payments will stop when your client dies unless death benefits are added.

They can choose to have their income payments guaranteed for a period of up to 10 years. If they die within the guarantee period, payments will continue for the remainder of that period.  The longer the guarantee period, the more costly this option is.

5) Do they want to provide a pension for a dependant?

They can choose for their dependant (spouse, registered civil partner or financially dependent partner) to receive a percentage of their pension income after they die.

A dependant’s pension will be paid for the rest of the dependant’s life and will be taxed as earned income. The larger the percentage of income to be paid, the more costly this option is.

6) Do they want their guaranteed payment period and their dependant’s pension payments to overlap?

If they die during their guaranteed payment period and they've chosen ‘with overlap’, then the dependant’s pension income will be paid at the same time as the remainder of the guaranteed payments are paid.

If they've chosen ‘without overlap’, their dependant will have to wait until the end of the guarantee period before they start receiving their pension income. This is the cheaper option.

7) Is their dependant’s pension for a named partner?

If they’re married or in a registered civil partnership, they can decide whether they want a pension income paid to their current partner only (named); or paid to their partner at the time of their death (any).

Named is cheaper but if they choose this option and they re-marry, their new partner will not be entitled to a pension.

If they’re not married or in a registered civil partnership and they want to provide benefits for their current partner when they die, they must name them on their application.

Our With Profits Annuity offers your client the added flexibility of being able to change the following two options after the annuity has been running for at least a year:

8) They can change their chosen Anticipated Bonus Rate

The Anticipated Bonus Rate (ABR) can be changed on the policy anniversary date in any given year.

The revised level of income will be based on the annuity rate available at the time.

9) They can convert to our Pension Annuity

If they decide that they would prefer the certainty of an income that won't fall, they can convert their With Profits Annuity to our Pension Annuity at any time following the first policy anniversary. However, once converted they cannot revert back to a With Profits Annuity.

For options 8 and 9 (above), we may ask for medical evidence before proceeding with their request.

Using contracted-out benefits to buy our With Profits Annuity

Your client won't be able to use funds from contracting-out of the earnings related part of the State Pension to buy our With Profits Annuity. 

Before applying

You can get multiple quotes based on various combinations of the above by calling us on
0845 765 4465. These could help decide which options best fit your client’s circumstances and budget.