For most people the first reference to the word ‘Annuity’ comes when their pension provider presents a range of options to them as they approach their policy retirement date.
An Annuity is simply an income which is purchased with a lump sum. In the case of a Pension Annuity, it is the pension fund (less any commencement tax free cash which is taken) which is used to buy the annuity.
The annuity payments are then usually paid to you monthly for lifetime, the pension fund however will then no longer exist.
There are many options for the income payments, they include;
- A level sum paid for your lifetime only
- A sum which escalates annually, for your life time only (different rates of escalation)
- As above but continuing for a partner’s lifetime after your death
- Payments which have a guaranteed minimum period, should death occur soon after retirement, eg 5 or 10 years
However, if an annuity is to be purchased, then the most valuable option is the ‘Open Market option’, which allows you to transfer your pension fund to the annuity provider offering the highest payout. This will almost always be a company other than the one the pension is currently managed by.
As Independent Financial Advisers we have access to the whole of the market meaning that we are able to compare rates from many different companies, unlike restricted Financial Advisers who will only be able to compare rates from a limited range of companies which may result in a less attractive annuity rate.
Financial advice should always be sought, as we may be able to source higher than normal rates for a variety of reasons, eg: Ill heath, smokers, previous occupations, postcode etc.
Contact us today and see how we can help you.
Get in touch for information and to book an initial meeting.
T: 01228 406 397
David Finan, Managing Director