Pension watch: Take out an annuity

If you're approaching your 75th birthday, start thinking about your pension arrangements, says Jill Insley in The Observer. Pensioners who delay until the last moment risk losing the chance to take 25% of their pension fund as a tax-free lump sum (this is non-negotiable once you pass your 75th birthday) and could get a lower retirement income.

You can buy an annuity from the age of 55 but many people now delay until 75. We are living and working longer, and the older you are the better income you'll get. You may even be entitled to an "impaired life" annuity in your seventies if your health is poor. Annuity rates are also low. But that doesn't mean that you should "take it to the wire". Many 74-year-olds are leaving it too late to "exercise the open market option".

So they have to accept the annuity rate offered by their pension firm, which is unlikely to be the best on the market. And Standard Life, one of the biggest pension companies in the UK, gives policy-holders just six weeks' notice. But you'll need at least six months to make the necessary arrangements.

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