Annuities are contracts whereby the provider agrees to pay the investor a guaranteed income, either for a specific period or for the rest of his or her life, in return for a capital sum. The capital however is more often than not non-returnable. They should not be confused with "Retirement Annuities" (also known as Retirement Annuity Contracts (RACs) or Retirement Annuity Policies (RAPs)). These were the forbearers of the personal pension, but new RA policies ceased to be issued after 30th June 1998. Those who had contracts before that date may continue to make contributions however.

Annuities are the most common way for an individual to unlock their pension funds, but it is nevertheless a complex process to determine when an annuity should be purchased. If interest rates are expected to rise, it may be wise to postpone the purchase of a lifetime annuity or even to split your pension fund to buy multiple annuities at different times (known as phased retirement). Producing a summary of the available options would be misleading as no two individual's circumstances are the same, and therefore each case must be considered separately. If you would like advice in this area, then remember that you can receive it under no obligation from a local adviser recommended by ifasw.co.uk - Just ask us by clicking here!