Countrywide Money offers FREE of charge introduction to FCA registered IFA’s [Independent Financial Adviser’s] who are annuity specialists to help you review and potentially boost your income in retirement. They will look at these key points:
- whether you want protection against inflation
- how much risk you’re prepared to take
- whether anyone else is dependent on you for income
- how much flexibility you need to change your pension after it has started to be paid
- how much control you want over your investments
- what charges you'll need to pay
- whether you want to provide an inheritance for your survivors
- what your state of health is and whether you are or have been a smoker
To arrange your NO COST, NO OBLIGATION Annuity Review either give us a ring on 0800 195 3757 or complete the Call Back form and we will ring you.
What is an annuity?
An annuity is a financial product that allows you to convert your pension savings into a regular income that will last you for the rest of your life.
When you get a quote for an annuity, you'll be given a rate as a percentage. You'll need to multiply by your pension savings to calculate how much income you'll get every year.
- So, if you have £100,000 in your pension pot, and are offered an annuity rate of 6%, you'll get an annual income of £6,000 a year.
What's changing with annuities?
The major proposals are:
- Annuities providers will be allowed to vary the amount of income they pay. This could allow you to take less when you start to receive the state pension, for example. You may also be also be able to take larger sums later on in your retirement, perhaps to help pay for long-term care.
- You’ll be allowed to take a lump sum from an annuity. At the moment, once you buy an annuity, you get paid an income from it with no further withdrawals. New rules will allow you to take a lump sum from an annuity, provided you agree to this when you buy one.
- Your family will be allowed to be paid from your pension after you die. Guaranteed annuities pay out to your beneficiaries after you die, but this usually only lasts for 10 years after you bought the annuity. Next year, the government will make sure that your pension fund is returned to your family when you die. And your family could receive this as a lump sum, if it’s under £30,000.
What are the different types of annuity?
There are a variety of annuities for you to choose from that are suited to you and your partner's needs.
- Single life annuities - all the income is paid to you
- Joint life annuities - some or all of your income is paid to your partner after you die
- Escalating annuities - your income rises every year, often by the rate of inflation
- Enhanced annuities - these pay you more income if you have a medical condition
- Investment annuities - your money remains invested with the potential for higher income
- Flexible annuities - these are complex products that pay you a guaranteed income but leave the potential for your money to grow by keeping part invested
- Fixed-term annuities - these pay out for a fixed period, after which you get paid a lump sum
Who can buy an annuity?
You can only buy an annuity if you have a defined contribution workplace pension or a personal pension – defined benefit, or final salary, pensions pay you an income directly, so there's no need to buy an annuity.
With some workplace pension schemes, the pension trustees - the people looking after your pension savings - may buy an annuity for you. Find out what your options are from your scheme manager.
What are the benefits of annuities?
One of the key benefits of an annuity is that your income will be guaranteed – you’ll receive a fixed regular payment each year until you die. Your retirement income won’t be subject to stock market fluctuations either (unless you select an investment-linked annuity).
Keep up with rising prices
You can also choose annuities that will increase in value every year in line with inflation. This will ensure that your money in older age keeps up with the rising prices of goods, giving you a comfortable retirement.
Get paid more for being poorly
If you have poor health, enhanced or impaired annuities pay out a higher income than standard annuities – as much as 65% more - because the insurer will have to pay out for a shorter amount of time due to your decreased life expectancy.
What are the downsides of annuities?
You can't change your mind
The biggest downside of buying an annuity is that the decision is irreversible. You can’t ‘switch’ annuity providers for a better deal, like you can with insurance or bank accounts. This means that you have to get the decision right first time. However, from April 2015 onwards you won't be compelled to buy an annuity.
You can't leave anything behind
If you've used all your pension savings to buy an annuity, you won't be able to leave any behind to your family when you die - even if you haven't been paid back all that you put in.
It all goes to the annuity provider - this 'cross subsidy' exists so that people who die younger pay for people who live longer and end up getting paid more income than they put in.
Rates fluctuate all the time
Annuity rates aren't just based on your personal circumstances - they're also based on the investments annuity providers use to fund the products. If these are performing poorly at the time when you retire, you may get a lower rate. Rates are also getting lower because providers have to account for people living for longer.
We do not provide Annuity advice ourselves, but we can refer you to an annuity IFA who specialises in this area.
Want to know more? Request your FREE, NO OBLIGATION Annuity quotation NOW on: 0800 195 3757