Anyone aged 55 or older is able to buy an annuity, an income for life provided by an insurance company in exchange for a pension fund or lump sum. Deciding on an annuity is a big decision to make because it’s a one way journey, once bought it cannot be changed and there are initial factors that need to be taken into account when considering it as an option.

It is suggested that anyone looking at annuities does an initial risk assessment and considers what type of investor they want to be; conservative, moderate or aggressive. Sources of income and spending needs may well dictate whether to buy or not to buy.

Variable annuities certainly carry an element of risk but for those individuals who don’t have a pension from their job, a conventional level annuity can be a route to providing a regular income stream for life. According to Annuity Direct around 85 per cent of people choose this option.

Shopping around for the best annuity provider is crucial, research undertaken earlier this year showed that two thirds of people buy their annuities from the same company who they built up their pension with, blissfully unaware that they have the right to shop around to find the best annuity rates.Annuity does offer a degree of flexibility for investors. There is no need to buy just one annuity and there are several types that can help generate income. With the current economic climate, spreading a pension across several providers has been seen as an attractive option for many because it can help diversify and reduce risk.

Investor apathy usually leads down the path of purchasing an annuity from the existing pension provider, in many cases this will be a very expensive mistake.

There are other more flexible options at retirement which may be more suitable for some.  Everyone’s circumstances are different, deciding not to go for annuity on retirement is an equally big decision but one which does open doors to alternatives.

If there is one message to be made clear is to spread the word that annuity purchase is not as straight forward as some would make you think. The wrong decision may cost you for the rest of your life.