When you reach retirement, you’ll want to start using the pensions savings you’ve spent decades building up. And depending on whether you want to have a regular retirement income, or something a little more flexible, you’ll have several options when it comes to taking your pension.

Annuities are insurance products that let you exchange your pension pot (minus your tax-free cash) for a guaranteed, regular income for the rest of your life. Buying an annuity used to be the only option available to most people taking their pension. But the introduction of so-called ‘pension freedoms’ in 2015 opened up more choice to consumers, reducing their popularity. However, they remain a good option for many people entering retirement.

Your annuity rate (the amount you’ll receive annually until you die) is calculated based on the size of your pension pot, your age, health, and lifestyle – as well as any other options you might add to the contract. If you want your annuity to be passed on to your spouse when you die, for example, that will influence the annuity rate you receive.

In some ways, an annuity is a ‘bet’ with an insurer about when you’re going to die. That’s because it’s guaranteed until the end of your life – whenever that is. The amount you pay in upfront may be more or less than the final sum you end up taking from the policy, depending on how long you live.

Many people value the certainty provided by an annuity, but any options you select at the outset cannot be changed later. So, if you buy an annuity contract that can be passed to your spouse when you die, and they die before you, you won’t be able to adjust the terms. And if you have a poor medical history or you’re experiencing ill health, you might be eligible for higher regular payments under an enhanced, or impaired life annuity (something you can’t move to later on).

For these reasons it’s crucial to seek professional advice before buying an annuity.