A pension annuity is where you exchange either some or all of your pension pot in return for a guaranteed income for either the rest of your life, or for a set number of years (e.g. 20 years).
The amount you get each month could increase each year (such as in line with inflation), or stay the same. It depends on the annuity you purchase. And the amount you get often depends on your personal circumstances, such as your health, medical conditions and things like if you smoke.
Annuities are an alternative to ‘pension drawdown’, which is where you leave your pension pot where it is, where it can keep growing over time, and you simply withdraw from it as and when you need it (e.g. monthly).
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