Glossary · UK
What is Deferred Annuity?
An annuity contract purchased now but with income payments beginning at a specified future date.
Full Definition
A deferred annuity allows a pension saver to lock in an income rate today while delaying the start of payments, typically until retirement. During the deferral period the fund grows (or the insurer bears the investment risk in a fixed deferred annuity). In the UK context, deferred annuities are relevant where someone wants to secure a guaranteed income starting at, say, age 75 while drawing flexibly from a drawdown pot in the meantime. They are often used alongside flexi-access drawdown under pension freedom rules. The price of a deferred annuity reflects interest rates, the length of the deferral period, and actuarial mortality assumptions; purchasing in a higher interest-rate environment typically secures a better rate.