Compulsory Purchase Annuity

You can buy a Compulsory Purchase Annuity with the money you have in your pension pot. You’ll receive a guaranteed taxable income for the rest of your life.

You have some choices about how you want to receive your annuity. For example it could be paid monthly or less often, you might want to take into account inflation or you could arrange for your dependants to continue to receive payments after you die.

If you’ve saved into a pension plan with another company, you can still buy your annuity from Standard Life. This is known as an Open Market Option. We’ll provide information and support to help you make the right choices.

Buying an annuity is a long-term decision − once it’s set up you can't cash it in or make any changes.

This option might suit you if:

• You like the security of knowing that you have a guaranteed regular income for the rest of your life
• You want to receive your pension income at the same time as taking your tax-free lump sum
• You want to use all or part of your pension pot to secure an income

How much income will you get?

The income you'll get will depend on a number of factors. The most important ones are:

• The amount of money you have in your pot available to buy the annuity
• Your age and gender (until December 2012) More information on gender discrimination.
• Annuity rates
• Your residential postcode
• The options you choose – for example, will the annuity include regular increases, or continue to be paid to your dependants when you die

The Standard Life difference

• You’re supported by  our award-winning customer service. We’ll take you through the transition from having a pension pot to receiving an income – smoothly and easily

• An annuity is a long term decision so it’s good to known you’re in experienced hands. Established in 1825, Standard Life provides life assurance, pensions and investment management to over 6 million customers worldwide.

Buying a Standard Life annuity with a pension plan from someone else

If you hold a pension plan elsewhere, you can still buy your annuity from Standard Life. If you want, you can take your tax-free lump sum from your existing pension provider, then use the remainder of your pot to buy an annuity from us.

Buying an annuity needs careful thought. We strongly recommend you get financial advice to make sure you choose the option that’s best for you. There may be a charge for this advice.

It's important to consider your choices carefully. Once the annuity is set up, you can't cash it in or make any changes.

• You have a number of options to choose from to make sure the income you get for the rest of your life meets your needs and the needs of those who are financially dependent on you. For example, it is important to consider how inflation may reduce the purchasing power of the income over the years.

• Adding more options generally reduces the amount of income that you get initially

• When you die, your pension benefits will stop unless you specifically build in an income for those who are financially dependent on you or add a guarantee period of up to 10 years

• Think carefully about the choices you make. Because once you've bought this plan and the 30 day cancellation period has expired, you can't change any of the options and you can't transfer to another provider

Find out more

Before buying a Compulsory Purchase Annuity you need to be fully aware of the risks and commitments. You should read the Key Features (PDF, 191kb) and the rest of this section.

Get financial advice

Buying an annuity is a long-term decision. It’s also one you can’t change later, so it’s worth seeking professional advice. Speak to your financial adviser or contact Standard Life Direct on 0845 272 8810 (call charges will vary). A financial adviser may charge for giving advice.

Standard Life Direct is provided by Standard Life Client Management which advises on, and sells products from, subsidiaries of Standard Life plc and some other companies.

One of the main benefits of an annuity is that you can build in options to make it really suit your needs and work for you in retirement.

Options to consider include:

• How often the payments are made - this could be monthly, every three months, every six months or every year

• When your payments will start - you can have them paid in advance so you'd get the first payment as soon as the annuity was set up, or in arrears where the first payment would be made one 'payment period' after we set up your annuity. For example, if your payments are to be made monthly in arrears, the first payment would be one month after your annuity was set up

• An income that increases each year - by a fixed percentage, up to 8.5% per year

• An income that protects your buying power - by increasing and decreasing in line with the Retail Prices Index (RPI). Be aware that RPI can go down as well as up, so your income could go down

• An income for your wife, husband or civil partner - they will still get an income if you die before them

• An income for another adult  - who is financially dependent on you, your children or a child with special needs. We may be able to help you set up an income for them if you die first

• Guaranteed payments - for a set period of time. If you die within that time, payments will continue to the end of the guarantee period. You can normally choose a guarantee period of up to 10 years

How annuity options work - shaping your annuity video

We'll accept the proceeds of any pension fund as long as:

• Any tax-free lump sum you want to take has already been paid to you
• The amount being used to buy the annuity would otherwise be used to provide a retirement income
• The rules of the pension plan allow this kind of purchase

If your pension plan is already invested with Standard Life, there are no minimum or maximum limits on the pension pot value. If your pension plan is with another provider, the minimum amount is £5,000 and the maximum is £500,000.

Pension pot value more than £50,000? Our Self Invested Personal Pension could offer you greater flexibility.

Income tax

The income you receive from your annuity will be taxed under the Pay as You Earn (PAYE) system.

You can find out more on the HM Revenue & Customs website.

This link is provided for general information purposes only. Standard Life accepts no responsibility for information contained in the site or for the site not being available at all times.

Laws and tax rules may change in the future. The information here is based on our understanding at April 2012. Your personal circumstances also have an impact on tax treatment.

Are you old enough?

You cannot normally buy an annuity before age 55. There are special rules to allow pensions to be paid before age 55, due to ill health, for certain conditions and certain professions.

We include the charges and costs for your annuity when we work out how much income your plan will buy. Once your plan is set up, you won’t pay any other charges.

Our quotation and policy schedule will show what these charges are.