Frequently Asked Questions

Do I have to take an annuity?

No. Since April 2015, no-one is forced to buy an annuity, there are a number of alternative pension options available to you,

Do I have to purchase an annuity through my current pension provider?

No. You are likely to find the best annuity rates by exercising your 'Open Market Option' and purchasing your annuity through an alternative pension provider. If you have received an annuity quotation from your current pension provider, we can compare this for you free of charge and without obligation. Please note that this only applies to money purchase pension schemes. If income derives from a final salary pension scheme, this may not be an option.

How will my annuity be taxed?

Any income from an annuity is treated as earned income and normal UK tax rules apply.  Please note that this tax treatment depends on individual circumstances and may be subject to change in the future.

I have more than one pension fund, do I need a separate annuity for each one?

No. You are normally able to buy one annuity by accumulating all your pension funds together.

How does a drawdown pension work?

With a Drawdown Pension, you invest your capital and take an income directly from the fund itself by way of 'cash withdrawals'. In the event of your death, the value of your Drawdown pension fund can be paid to your nominated beneficiaries, free of tax if death before age 75, but normally subject to tax at the recipients marginal rate if death after age 75.

Note: The Budget of 30 October 2024 included an announcement about tax on pension income. Please see details below under ‘Update – October 2024 Autumn Budget’.

When can I purchase an annuity?

You can purchase an annuity anytime from the age of 55, although there may be early retirement penalties depending on your pension provider.

Can I take my tax free cash without taking my pension income yet?

Yes. A drawdown pension allows you to take your tax free cash and leave the remainder of your pension fund invested in a Self-Invested Personal Pension (SIPP), until such time as you decide to draw an income or purchase an annuity.  This facility is also available through a fixed term annuity without any investment risk.

What happens to my annuity income when I die?

There are a number of annuity options available to you, when setting up your annuity. If you do not select any of these annuity options, your annuity payments will not continue in the event of your death.

• Guaranteed Payment Period - You can normally select a guaranteed period for your annuity of up to 30 years, during which time; if you die your annuity will be paid to your estate or any dependents for the remainder of the guarantee period.
• Joint Life Annuity - You can opt for a joint life annuity, where a proportion of your annuity income will continue to be paid to your nominated beneficiary for the remainder of their life.
• Value Protection - You can choose to protect all of your fund or a percentage of it for your beneficiaries. Your annuity provider will pay a lump sum to your beneficiary when you die. This payment would be the protected percentage of the original pension fund value used to buy your annuity, LESS the gross income you receive in annuity payments.

Any lump sum or income received by your beneficiaries will be paid tax-free to them if you pass away before the age of 75, but treated as their taxable income if you pass away aged 75 or over.

Update – October 2024 Autumn Budget: 

In the Budget of 30 October 2024, the government announced that pension savings will be considered part of someone’s estate and liable to inheritance tax (IHT) from April 2027. This will be within existing IHT rules: IHT is not payable by a person’s spouse or civil partner, and is only typically payable on estates over relevant IHT thresholds.

Another aspect of inherited pensions is income tax. Currently, if you pass away before age 75 any pension funds or annuity income your beneficiaries receive is free of income tax, whereas they are liable for income tax at their marginal rate if you die after age 75. Retirement Line’s understanding is that beneficiaries may still be liable for income tax on inherited pension income from April 2027, although it isn’t clear whether the ‘age 75’ rule will remain.

More information will be available following a government consultation period that will run until early 2025. We are monitoring this issue and will report on it once the matter is clarified. Please see our Budget report for more information: Budget 2024 – pensions brought into inheritance tax from 2027.

How long will it take to set up my annuity?

This depends largely on your current pension provider and how quickly they transfer your pension fund to your new annuity provider. Setting up an annuity typically takes between six to eight weeks.

My pension fund is quite small, what are my annuity options?

Retirement Line can provide annuity quotations for pension funds as low as £1,000. Alternatively, since 2015, you can take your pension as a lump sum from age 55. You can take 25% tax free and the remainder is subject to income tax at your highest marginal rate.

How much will it cost me to use the annuity services of Retirement Line?

Retirement Line provides information about your annuity options and annuity quotations without any obligation to use our annuity service.

If we arrange an annuity for you, we will be paid a commission from the provider, which is taken into account when calculating their annuity rate.

What is a Purchased Life Annuity (PLA)?

This is an annuity that is purchased with a lump sum that is not from a pension fund.

Can you give me advice on my options for retirement?

Retirement Line currently operates on a non-advised basis, which means that we do not give advice, just thorough and factual information, in order for you to make your own informed annuity choice. If you would like advice, we can provide you with details of external Independent Financial Advisers and refer you to them. Just ask when you call.

Am I covered by the Financial Services Compensation Scheme (FSCS)?

Please note that the protection of the FSCS will not usually apply for non-advised services. However, your new annuity provider will be covered in the event of default. Please see "How safe is my new annuity provider?"

How safe is my new annuity provider?

In the unlikely event that your annuity provider was to become bankrupt, the insolvency practitioner would first try to find an alternative insurer to take on the liabilities. If however, they could not find an alternative, annuities would be covered by the Financial Services Compensation Scheme (FSCS). Annuities are classed as long-term insurance contracts and the FSCS should cover 100% of the claim with no upper limit. Please note the claim would be based on the value of the annuity, as determined by the insolvency practitioner.

What do I do if I have a complaint?

If you wish to register a complaint, please contact Retirement Line Limited in writing - 52 Forder Way, Hampton, Peterborough PE7 8JB.

Please note that the protection of the Financial Ombudsman Service (FOS) will not usually apply for non-advised services.