What is an annuity?

 

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What is an annuity?

Our service introduces you to advisors who will:

  • Explain your annuity options to you.
  • Show you how to maximise your income using annuities.
  • Ensure dependants are catered for while planning.
  • Demonstrate the tax consequences of the various options.
  • Discuss your alternatives to annuities.
  • Look at the impact of annuities on estate planning.

 

The main aim for you and us is to find an environment in which you can feel fully informed about annuities and maximise your pension assets.

Annuities are investments designed to safely convert pension funds into regular taxable income. Selecting the right annuity for you is about more than just the best rate available, especially if you are married and still have dependants.

Specialist Annuities:
Specialist Annuities like impaired life annuities, can have a significant effect on the income level you are being offered. If your mortality has been seriously affected by a terminal illness or some other misfortune then many companies will take the impact on your life expectancy into account. In the cold, calculating light of an actuaries office, the shorter your life expectancy, the larger your potential annuity payout.

Open Market Option (OMO):
Knowing that you have the right to shop around for your annuity provider can seriously enhance your income in retirement. This means that the company you spent years making pension contributions to for your retirement does not have to be the same company that provides your income in retirement. The Open Market Option literally means the entire annuity market is open to you, for you to shop around and find the highest bidder or best rate.

Who needs the income?
Selecting the annuity that is right for you is about creating peace of mind for yourself today and financial comfort for any dependants in to the unforeseen future if you die early.

Taxation:
Selecting the right annuity also means looking at the overall tax consequences and the impact it will have when being added to your other income-producing assets in retirement.

Timing:
Taking out an annuity can also be a question of timing. Why take out an annuity if you don’t immediately need the income? Deferring the decision can not only reduce taxation it can also increase your pension entitlement in the future when you do decide to take it, because your fund was given more time to grow.

Asset Preservation:
Asset preservation for future generations is important for some people and not for others. Looking at annuities while considering the impact on future inheritance issues will allow you to balance your decision making.

Annuities Choices & options:
Not only are there different types of annuities including purchase life annuities, compulsory purchase annuities and impaired life annuities. As mentioned earlier you need to factor in guaranteed periods as well as dependant pay-outs in the event of an early death. All of the options and added extras have a cost consequence so are there any alternatives?

The short answer is “yes!” the slightly longer answer is to encourage you to look at our sections on income drawdown and phased retirement.

Take advice:
It is often said that a little knowledge is dangerous, especially in the highly complex and structurally demanding area of pensions. So unless you intend to spend large amounts of time researching and wondering if your making the right decisions or not, then make life easier by aligning yourself with an ally in the form of a qualified professional advisor.

Start the annuity processes by allowing us to introduce to a suitably qualified annuities advisor – complete our form today

Find out about death benefits, cash lump sums, new rules, taxation, the best providers, IHT, guarantees, and the best annuity for you Immediate Vesting Personal Pension Compulsory Purchase Annuity Purchased Life Annuity

Your Annuity

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Level Income Annuity



Level Income Annuity“>

This effectively means your income will never change for as long as the annuity is valid. It is up to you whether you want a lifelong policy or a fixed term between 2 and 20 years. This is seen as a safe option because although it does not rise, the rate of income can also

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Fixed Annual Increase Annuity



Fixed Annual Increase Annuity“>

This will cause your income to increase at a rate of your choosing year after year. It is possible to increase the rate by up to 8.5% per annum. A benefit of this option is the fact that your income before tax is guaranteed never to drop. The downside to this option is that you

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Inflation Linked Annuity



Inflation Linked Annuity“>

The rate of inflation is linked to the Consumers Price Index (CPI) which means your annuity rate will also be linked to the CPI. The fact that the value of your money in real terms (how much you can buy) remains the same is a major advantage. Inflation is the scourge of many pension plans

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Single Life and Dependent Annuity



Single Life and Dependent Annuity“>

The common single life annuity plan will run out the day you die meaning no dependents can withdraw on your behalf. However, there are certain annuity options which do provide for your loved ones if you so choose. Dependents If you were to die unexpectedly it may put an unfortunate financial burden on your family

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Annuity Guaranteed Periods and Capital Protection





Another useful option to have is guaranteeing your income from the beginning of a lifetime annuity. This means that you can guarantee your income for 12 years from the beginning of your annuity and if you were to die after 7 years, the rest of your money will go to a dependent for the remaining

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Is Your Annuity Payment In Proportion?



Is Your Annuity Payment In Proportion?“>

Having your income paid with or without proportion is an option available to those who elect to receive payments in arrears. If you choose the ‘with proportion’ option and die between payments, your provider will make a partial payment based on the time between the final payment and your death. For instance, someone who is

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Receiving Annuity Payments



Receiving Annuity Payments“>

When Does Payment Commence? The official starting date of an annuity depends on you but cannot happen until:  Your provider receives your filled in application form  They also receive a quotation signed by you which clearly outlines the way you wish to receive your annuity payments  A cheque you have sent to

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Lifetime Allowance and Enhancement Certificate



Lifetime Allowance and Enhancement Certificate“>

Lifetime Allowance Continue reading if you have purchased any other policy barring a Purchased Life Annuity. Unfortunately, there is a limit on how much you can save in a pension over the course of your life known as a Lifetime Allowance. This limit seems to change every year and increased to £1.8 million in 2016.

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Annuity income- Taxation on annuities



Annuity income- Taxation on annuities“>

The following information pertains to the Immediate Vesting Personal Pension Plans as well as a Compulsory Purchase Annuity. When you are withdrawing regular annuity income, this money will be taxed as Pay As You Earn (PAYE) income with a basic tax charge of 20% applying. Your provider gives you an income from one of the

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Annuity rates and how they affect your retirement income





If you are a member of a defined contribution company scheme or a personal pension, when you come to retire you will exchange the pension pot you’ve built up over the years for an annuity. The amount of regular pension you get in retirement will depend upon the size of your pension pot and the

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