Making Money How to get a guaranteed income for life - annuities explained
May 19, 2025
Mark Ormston, a retirement expert from Retirement Line, unpacks the world of annuities and their resurgence amid rising interest rates. He explains how these financial products can offer guaranteed retirement income and the expected returns for savvy planners. Mark delves into the complexities of different annuity types, emphasizing the importance of comparing providers. The conversation also touches on the impact of health, lifestyle choices, and recent pension freedom legislation on retirement strategies, making it essential listening for anyone planning for their future.
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What Is an Annuity?
- Annuities provide a guaranteed income for life from a lump sum, typically a pension pot.
- They can be tailored for life or to continue payments to a spouse after death.
Typical Annuity Returns Explained
- A £100,000 annuity at age 65 can pay about £7,700 annually guaranteed for life.
- Inflation protection is optional but reduces initial payments.
How Providers Afford High Returns
- Providers invest annuity funds mostly in UK midterm gilts yielding around 4.9%.
- The excess return to pay annuities comes from the gamble that some buyers die earlier than expected.