How To Buy An Annuity
With two ways to purchase an annuity it's important to understand the options.
Your client can set up a Annuity with either a transfer (which becomes an Immediate Vesting Personal Pension) or an Open Market Option from a UK registered pension scheme.
Open Market Option
An Open Market Option is a right your client has under their existing ‘money purchase’ (also known as ‘defined contribution’) pension scheme. Under this option, the scheme will pay any tax-free cash the client chooses to take and check that they have not exceeded their Lifetime Allowance. The remaining fund will then be sent to us to buy the annuity.
Pension Transfer
Under an Immediate Vesting Personal Pension, the pension fund, including any tax free cash, will be transferred to us. This will be paid into the LV Personal Pension Scheme, which your client will then become a member of.
We will then:
- Check the benefits do not exceed their client’s available Lifetime Allowance
- Pay any tax-free lump sum payment they choose to take, up to a maximum of 25% of their pension fund
- Set up the annuity and start paying the regular income
Your client won’t then be entitled to any further benefits from their existing pension scheme in respect of the transfer.