What happens to the money in a deferred annuity before you take it?
30 September 2025
Question by Dave
I am looking for a deferred annuity purchased now-ish to take advantage of the current gilt rates. Say 100k from my pension savings. However, I do not wish to take funds till after my 67th birthday in September 2031. What would happen to the monies that would have been paid out in the 6 years. Are they just kept in the account till I draw them?
Answered by Boring Money
Hi Dave,
First of all, deferred annuities are not widely available in the UK. You may be able to contact a financial adviser to help you find one.
Now to the details. In the simplest of terms, the money will sit in the annuity account until the date that you have agreed it will start paying out (in your case, around 6 years). It will typically be invested by your insurer with the aim to generate growth until the payouts begin.
You can buy a deferred annuity either with a single lump sum or add to your pot in smaller instalments over a period of time. Up until your payouts start, your investments are shielded from tax.
The specific investments your money will be put into will differ depending on which insurer and policy you opt for. As there are limited deferred annuity products on the UK market, if you are interested and want to discuss which one is best for you, it's a wise idea to get a financial adviser to help you with your search and take you through the pros and cons.
Hope this helps!
