An annuity which must be purchased on retirement for a member of an insured pension scheme.

Compulsory purchase annuities are bought with a payment from an employer's pension scheme or personal pension fund. Part of the fund may be paid out as tax-free cash, the remainder must be used to buy an annuity. The income payments (usually monthly) from this type of annuity are taxed as earned income and are usually paid to the recipient net of basic rate tax. Higher rate taxpayers may be liable for additional tax which at present has to be collected separately.

An annuity specifically designed to provide income after retirement from the proceeds of a pension fund.

Some approved occupational pension schemes produce a benefit at retirement that is expressed in cash terms rather than pension. The cash sum produced must then be used to purchase an annuity known as a 'Compulsory Purchase Annuity' (but see Commutation).

CPA) This is an annuity that an insured occupational scheme must buy for a member when they retire.