This is where an insurance company, bank or building society of your choice takes your AVC fund and pays you a pension in return.
You must buy your annuity with your AVC fund at the same time as you take your LGPS benefits. The only exception is certain flexible retirement circumstances where you may be allowed to delay payment.
If you work after normal pension age you cannot buy an annuity until you stop working and retire, or you reach the eve of your 75th birthday if this is earlier.
An annuity is paid completely separately from your LGPS benefits.
The amount of annuity depends on several factors, such as interest rates and your age. You also have some choice over the type of annuity, for example whether you want a flat-rate pension or one that increases each year, and whether you also want to provide for dependants benefits in the event of your death.
Annuities are subject to annuity rates which in turn are affected by interest rates. When interest rates rise, the organisation selling annuities is able to obtain a greater income from each pound in your AVC fund, and therefore can provide a higher pension. A fall in interest rates reduces the pension which can be purchased.
Other options are: