What is a Pension Annuity?
An Annuity is a product that you buy for a lump sum that guarantees an income for the rest of your life. At present, Pension Annuities are only available through insurance companies. When you buy an annuity, you sell your saved pension fund to exchange it for a regular income.
When is the right time to buy an Annuity?
You should always discuss financial decisions with your trusted
IFA, but generally people buy Annuities when you are ready to retire. This will provide an income to replace your salary or wages. You must have purchased your annuity by the age of 75.
Do I have to take the Pension Annuity offered by my Pension Provider?
No, you do not. You can see what they offer and then shop around for the best
pension quotes.
Why should I shop around for my Pension Annuity?
Never accept the first annuity offered to you, you could lose a lot of your savings this way It’s essential that your shop around when purchasing an annuity product. First, each insurance company offers different levels of dividends. Second, each company has different buy-in deals. Third, each company has products that have performed differently in the past and are forecast to behave differently in the future. There’s a daily update of annuity prices and tables of ‘best buys’ that you can check. Speak to your IFA about the best annuity for your own personal circumstances.
Is it true that some of the pension fund is tax-free before I buy the annuity?
Yes, 25% of the pension fund can be taken as a tax-free lump sum. The remainder can be used to buy a pension annuity.
How often would my Annuity income be paid to me?
You can arrange for the income to be paid to you in instalments of your choice from monthly up to annually.
Can I change my mind about a pension annuity?
Yes, up to 30 days after you sign the application, you can change your mind and cancel the agreement.
Are there any enhanced benefits or rates available?
Rates and benefits are dependent upon your gender, health, age, the interest rate when you purchase your annuity and any bonuses or option extras you may have added to your annuity. Yes, if you are a smoker, or have a lower life expectancy, you can benefit from enhanced products, ask your IFA about this to hear more.
Hasn’t there been recent calls to reform pension annuities?
Yes, the media has recently reported that MPS have called for reforms. Reform is mentioned every few years and sometimes small changes are made to the system. To keep up to date, stay in regular contact with your IFA.
How do I know if it’s right for me?
To find out if a Pension Annuity is right for you, you should always discuss an important financial decision with a qualified and experienced Independent Financial Advisor.
