Pension annuity gives us the income that we need after retirement. For most people, annuity is the main source of income after they are no longer in employment. So what is an annuity?

An annuity is an investment product. It gives regular payments, or annual lump sums against the money built up in your pension policy. Can you take this capital as a lump sum? Yes, but only 25% of it, and this is tax free. However, the rest of the capital must be converted into an annuity plan.

How much you get against the same capital can vary from provider to provider. This is why it is important to shop around before choosing a pension annuity. According to a recent survey, as much as 66 per cent of retirees today accept pension annuity from their provider without opting to shop around for a better deal.

The open market option allows you to shop around the market for better annuity rates than the quote you have received from your pension provider. According to the same survey, annuity rates could have been increased by upto 30% should the open market option have been considered.

You can add and remove features from your annuity plan in order to make it more suitable to your needs. For example, it is possible to add a spouse income to your annuity.