ANNUITIES

THE CHOICE YOU MAKE WILL LAST A LIFETIME

Your pensions savings may have accrued with a provider who is not very competitive in the annuity market and the annuity your fund could purchase may be significantly improved by shopping around.

An annuity  is the tried and tested method of providing an income in retirement. Normally after any tax-free cash is taken, the balance of an individual´s retirement fund will be used to purchase an annuity at the then available rates.
There are a number of factors which will affect the amount of an annuity an individual can secure with his/her retirement fund. These include:
Interest rates - The amount of annuity will be affected by the prevailing interest rate on long-term gilts and corporate bonds. The lower the rate of interest at the time of annuity purchase the lower the pension that can be secured.
Life expectancy of pensioners - If the gradual increase in the life expectancy of pensioners continues, annuities will become more expensive.
Age of annuitant  - The older an individual is when purchasing an annuity the higher the income he/she will receive, as the income will be paid for a shorter period.
Sex of annuitant - For the same retirement fund a man of the same age as a woman will receive a higher income. This is because the man has a shorter expectation of life, which will on average mean the income will be paid for a shorter period.
Open Market Option -
These are available to those with Personal Pensions and Retirement Annuity Contracts and enable the annuitant to shop around for the best annuity rate.

Enhanced Life Annuity
Sometimes impaired life annuities may be available for those in poor health, on certain medications or who have a reduced life expectancy.  The may provide a higher level of income than their existing provider because a specialist annuity provider considers the medical position of annuitant when calculating annuity payments. Completing a simple medical questionnaire could determine whether you may qualify for an enhanced annuity.

Impaired Life Annuity
An Impaired Life Annuity may be suitable for funding for long term care where there is a reduced life expectancy due to serious poor health.

Some other types of annuity:

Level Annuity    Pays a level income from outset until death.  It can include widow’s benefits, where the pension continues at the same rate or reduces by half on annuitant’s death. Guarantees can be built in to ensure the pension is payable for a minimum of 5 or 10 years.  If death occurs after the guarantee period and no spouse’s benefits apply, the remainder of fund stays with the annuity provider.

Increasing Annuity   As above, with the exception that the annuity in payment can increase either in line with RPI (Retail Prices Index) or a specified percentage amount (3 - 10%).

Conventional annuities depend on returns from gilts and fixed interest securities which are considered relatively cautious investments.  The past 10 years has seen an overall reduction in annuity rates.  For example in 1990 a single life annuity for a male aged 65 would have produced 15.64%.   In 1999, that figure reduced to 8.86% and in 2004 there was a further reduction to 7.6% and 7% in 2006 & 7.3% in 2007

With Profits Annuity   The pension fund is invested in a with profits fund, which is normally made up of investments such as shares, property and fixed interest securities from which a guaranteed minimum pension is paid.  Each year bonuses are added to the guaranteed minimum amount - the bonuses will depend on how well the fund and the stock market have performed - and your income should gradually increase over the years.

The With Profits fund smooths the ups and downs of the stock market, which means that your income should be relatively consistent despite these fluctuations. The guaranteed minimum amount will initially be around 85% of a conventional annuity but with a potentially higher income in later years.  Spouse’s pension and guarantee  period can apply. Low bonus rates make this less attractive and is not recommended.

PLEASE CONTACT US FOR A QHOLE OF MARKET ILLUSTRTION BEFORE YOU DECIDE TO ACCEPT THE ANNUITY YOU ARE OFFERED.

THE CHOICE YOU MAKE WILL LAST A LIFETIME.