An annuity is a contract with a life assurance company that will pay you a regular pension income for the rest of your life in return for you paying them a lump sum when you retire. The amount of pension income (annuity) you receive will depend on many factors such as the size of the lump sum, annuity rates at the time, your age, whether it is payable for a set period and/or includes a dependant’s pension and state of health. You do not have to take the annuity with your current provide and it is very important to shop around as annuity rates can defer greatly.