An annuity quite simply put is an investment; they are bought from insurance companies usually from pension funds. It is a one way of turning a lump sum of money into an income that is guaranteed for the rest of your life.

Legislation states that most people between the ages of 50 and 75 must buy an annuity along with there personal pension. The amount of income you receive each year for your lump sum is based on the annuity rate, the amount you in your pension fund, your health, sex and age when purchasing the annuity.

The income will also take into account whether it’s just for you or if there is a partner involved. Also the older you are the higher the income will be for an older person will have fewer years than a younger one to live.