Annuities FAQs.

A pension annuity converts the funds built up in your pension scheme, into a regular income. The income is payable for the rest of your life and will be subject to income tax. If you’re lucky enough to be in a salary related (‘defined benefit’) scheme then the chances are your scheme will provide you with your pension income.

However, if like the majority of people, you’re in a money purchase (‘defined contribution’) scheme, then you will need to use your pension fund(s) to buy an annuity to provide your pension income.

In the majority of cases you won’t have to buy your pension annuity from the same provider you have your pension scheme with. You can shop around as not all providers offer the same pension annuity products and each calculates their own annuity rates.

Shopping around for your annuity (commonly referred to as taking the Open Market Option) could enable you to obtain a higher pension income.

The Legal & General Group, established in 1836, is one of the UK’s leading financial services companies. As at 31 December 2011, we were responsible for investing £378 billion worldwide on behalf of investors, policyholders and shareholders. We also had over seven million customers in the UK for our life assurance, pensions, investments and general insurance plans.

Legal & General is a long established provider of pension annuities. We pay around £1.2 billion in pensions each year, to over 660,000 customers who have put their trust in us.

Assuming you’re not looking to take your pension benefits early, your existing provider should write to you no later than four months before your selected retirement date detailing the options available.

You can then request an illustration to get an idea of what benefits you could expect if you were to buy your pension annuity with them.

The illustration will also give you the value of the pension fund if you were to take the Open Market Option. You can then contact other pension annuity providers to get a comparative quote to see what they can offer you.

Annuities are typically bought with the proceeds of money purchase pension schemes. But where a Final Salary scheme does not provide a pension income direct from the scheme, the Trustees of the scheme may instead purchase an annuity on behalf of the scheme, to pay your income.

If you're not sure what to do, then we recommend you speak to a financial adviser.

No, you don’t have to stop working to start taking your pension benefits. However, if you’re in a company pension you may need to check what the scheme rules will allow. The earliest you can normally buy a pension annuity is currently age 55.

Buying a pension annuity is a very important decision; not least because once you’ve bought it you can’t change your mind.

You need to be sure that what you’re buying is right for you, as you may need to rely on the income it provides you with for many years to come.

Because of the importance, you may wish to speak to a financial adviser.

You can buy our Pension Annuity direct from us. If you know what you want you can speak to a member of our Annuity Solutions team. They can provide you with a quote and, where appropriate, an application pack.

Legal & General offers both a Pension Annuity and a With Profits Annuity.

A Pension Annuity will pay you an income for the rest of your life, the level of which is worked out when you buy it. Once in payment it will not be affected by what happens, for example, to the stock market or by changes in the housing market. Enhanced rates are available on our Pension Annuity.

A With Profits Annuity will pay you an income for the rest of your life whilst allowing you the opportunity to benefit from the potential growth of investments in a broad spread of assets including stocks and shares, UK property, cash and fixed interest securities. The value of investments can go down as well as up so your income could fall from one year to the next. You will not be able to buy our With Profits Annuity without going through an adviser.

An enhanced annuity is a pension annuity benefiting from improved annuity rates and therefore offering a higher pension income. If you suffer or have suffered from certain medical and/or lifestyle conditions then you may qualify for extra income from our Pension Annuity.

Yes. If your pension scheme is with another provider then the minimum pension fund we will accept is £1,000 (after payment of any tax-free cash lump sum).

Yes. Any amount of savings you use will be treated as a personal contribution for immediate retirement and you'll normally still be entitled to take a tax-free cash sum of up to 25% before your annuity payments start.

Provided the total of all your gross contributions paid to all your pension schemes in the current tax year don't exceed the greater of £3,600 or your relevant UK earnings (including salary bonus and overtime), then we can accept your contribution and add basic rate tax relief to it before using the total to buy your chosen annuity.

Any contributions over the current Annual Allowance (set by HM Revenue & Customs) of £50,000, could be subject to a tax charge.

The Annual Allowance also applies to increases in salary related schemes.

If you apply for our Pension Annuity, you have 30 days from the date you signed our application form to change your mind. You won't then be able to cancel or change your annuity payments.

Your income will normally be paid into your UK bank or building society account. You must be named as either the account holder or joint account holder. All payments will be made in British pounds sterling (GBP).  

We can arrange for payments to be made to an overseas account if requested, but there will be a charge for converting your payment from sterling to the required currency. The charge will be deducted from each payment instalment.