Buying An Annuity: Best Annuity Rates – Value Protection – Investments – Pensionfinder
It is possible to receive a higher annuity payment than normal if you are a smoker or can prove you are in ill health. Statistically, smokers and elderly people with a chequered medical history are likely to have a life expectancy lower than the norm. It should be noted that your medical condition does not have to be serious in order to benefit from a higher annuity rate. Independent advisors can help those who do have serious illnesses that have greatly reduced their life span. Those who have less than one year to live may even be permitted to withdraw the entire amount in one lump sum.
This is an annuity that protects a percentage if not all of the amount that you paid for the annuity should you die before the age of 75. If an annuity owner dies while the amount paid for the annuity is still greater than the total gross income paid, the remaining balance is paid to their spouse or dependents though a 35% tax rate applies. As this form of annuity is akin to an insurance policy, they usually cost more to purchase than the regular variety.
Annuities And Investment
Those who are looking for a greater return on their pension income may elect to try their luck with Investment Linked Annuities. By purchasing an annuity of this nature, you are placing your money in an investment fund. As these funds can fall as well as rise in value, there is a risk factor involved.
There are a multitude of funds available for pension pots of all sizes. You will be placed in a fund you can afford. The idea behind this form of annuity is for investors to enjoy an increased future income should the investment fund rise in value. However, its volatile nature ensures that there are never any guarantees.
Over the last few years, the level of flexibility involved with these investment funds has grown markedly. It is now possible to switch between funds if you find another investment that catches your eye. Your annual income is calculated by analysing the value of the units you hold. Investment funds are linked to the stock market so be prepared for your fund to fluctuate in value many times in the course of a year. Do not panic and pull your money out of the fund during rough periods. Investment Linked Annuities are for those who don’t mind some excitement and are not concerned about the fact that their investment could fall in value. Conventional annuities are safe and steady though they may not have the same thrill value!
If you elect to purchase an Investment Linked Annuity, you must decide on an anticipated growth rate which is used to decide your starting income as well as the possible future growth of your investment. The higher the anticipated growth rate, the higher your starting income will be. However, if the growth rate is not matched by the fund, this value will soon drop. Aim for a reasonable growth rate because your income could increase if this rate is exceeded.
It is also possible to purchase With-Profit Annuities which are also Investment Linked Annuities based on the specific With-Profit fund of the company whom you purchased the annuity off.