Cowie's Quick Guides, part 1 - Annuities Costs and yields vary widely, depending on which insurer you buy your annuity from. For example, a man aged 65 with £100,000 capital can buy a fixed income of just under £5,035 from Prudential - by no means the worst provider - but could obtain £5,950 a year from Aviva. That's 18pc per annum more and likely to add up to £20,000 extra income over the typical retirement. A woman of the same age could get £4,635 from Prudential or £5,680 from Aviva and stands to gain even more during a typical retirement. All yields are quoted before tax, which demonstrates the massive sums of capital needed to buy guaranteed income for retirement in today's low interest rate environment. When are they a good idea? The capital guarantee backed by a statutory safety net makes annuities very attractive to people for whom certainty is the priority. That includes the vast majority of pensioners because they are not in a position to work harder or longer to make good any investment losses. Even so, rising numbers of people with more than £100,000 savings are considering a relatively new alternative called 'income drawdown' where pension fund assets remain invested and pensioners attempt to live of the yield from these assets. However, that option does not provide the guaranteed income for life that only annuities can deliver. Where are the pitfalls? Annuity purchase is a 'once and forever' decision. In other words, after the cooling off period has expired, you cannot change your mind. Annuity purchase entails irrevocably passing all the capital being used to buy an income for life to the insurance company that promises to pay that income. So it is vital to get this decision right first time. Unlike most other investments, you will never be allowed a second chance. Despite these daunting facts, most people fail to exercise their statutory right to an 'open market option' or OMO. This means you don't have to buy your annuity from whichever company managed your pension fund while you were at work and saving. Instead, you can buy your annuity from any authorised provider - and exercising your OMO is the only way to be sure you have found the best deal for you. How safe is my money? Very safe. In addition to the guaranteed income for life that insurers authorised to sell annuities provide, annuities are covered by one of the most generous statutory safety nets. In the unlikely event that an insurer providing annuities went bust, the Financial Services Compensation Scheme provides protection equal to 90pc of the sum claimed with no upper limit. Who are the major providers and advisers? Only substantial insurance companies are authorised to sell annuities. In addition to the two mentioned above, Standard Life, Legal & General and AEGON are among the major providers. But, given the high degree of statutory protection, it is more important to seek specialist independent financial advice when exercising your OMO to identify the best annuity for you. Annuity Direct, Better Retirement Group and Hargreaves Lansdown are good sources of annuity advice. How can I tell good from bad? Before recommending any annuity, advisers should spend time finding out about the annuitant and his or her individual and family needs. For example, more than a third of all annuitants who seek specialist advice find that they are entitled to an enhanced annuity - that is, one that pays a higher income for life because the annuitant's medical factors suggest that he or she may receive fewer years' payment. This can range from modest income increases for people who smoke or are overweight to perhaps 25pc more income for serious illnesses such as stroke or cancer. At the other end of the scale, many married men who buy annuities direct from insurers - that is, without advice - buy single life annuities as opposed to joint life annuities. That means their widows will not get a penny income from the annuity provider after the man dies. So, when it comes to making the second-biggest financial decision of their life, many men get it wrong.