A pension annuity is only one of your many options.
When you reach the selected retirement age your pension provider has on their system for you they will send you a letter showing you what your options are.
Although not an exhaustive list of options, these will typically include:
- keeping your pension as it is and setting a new retirement age
- doing nothing and letting the retirement age roll on for another year
- buying an annuity with the money you have built up inside the pension
- transferring the pension to a drawdown arrangement.
Depending on the provider the alternative options may or may not be cleary stated. What is usually made very clear is that the simple option, some actually think their only option, is to let your provider convert your pension into an income for life. essentially what they are saying is that if you do nothing we’ll buy an annuity for you.
Obviously this annuity will be provided by your existing pension company and so you will not benefit from shopping around to find the best rates. Neither are you afforded the option of assessing realistically what the best option for you is likely to be in context with your financial needs.
So, do you have to buy an annuity or convert your pension in to an income for life when you reach the retirement age on your pension plan? No.
Is it important that you carefully assess all the options before deciding what to do and how to make absolute best use of your hard earned money and savings? Yes.