Pensions Glossary

Annuity
An annuity provides a guaranteed income for life in return for a lump sum invested. There are two types of annuities; Compulsory purchase and Purchased life. Compulsory purchase annuities are bought with a payment from an employer’s pension scheme or personal pension fund. Part of the fund may be paid out as tax-free cash, the remainder must be used to buy an annuity.

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