Tag Archives: Type of Annuity

What Annuity Type is the Best for Me?

As annuities become increasingly more popular in retirement portfolios, consumers are tasked with doing more research into the different kinds of annuities, the add-ons available, and eligibility factors for each. These factors help to determine what annuity is the most suitable for each consumer and their particular needs and interests.

There are several different annuity types, all of which present different benefits to the consumer. Determining what annuity presents the most benefits is crucial to each individual consumer as they plan their retirement years. The most popular annuities are as follows:

Value-protected annuities: This type of annuity is also known as a capital-protected annuity which is a more explicit version of the well-known guaranteed annuity. With the value-protected pension annuity, if the consumer passes away before age 75, the built-up fund is returned to their estate minus any income that was paid out along with 55% tax. What type of consumer would potentially benefit most from a value-protected annuity? Those who are most interested in protecting their estate should they pass way rather quickly after taking out the annuity would benefit greatly from this kind of annuity.

Impaired/Enhanced Life Annuities: This type of annuity offers a higher rate to those consumers who are expected to live shorter lives. Those who could potentially qualify for this type of annuity include those with rather severe health problems or those who are overweight or smoke heavily. The benefit to this annuity is the increased rate. A potential drawback is the need to meet with an independent financial adviser. This can often entail a rather lengthy and invasive application process, but can be beneficial for those who qualify for the enhanced life annuity. What consumer benefits most from this annuity? Those consumers who have a shortened life expectancy or are suffering from a qualifying disease or condition would benefit most from this annuity.

Investment-linked annuities: There are a couple of different investment-linked annuity products available. These include with-profits annuities and unit-linked annuities. The consumer is able to benefit from equity growth using these annuities, as they are tied to shares and corporate bond prices.

The most crucial aspect of investing in any annuity is being sure to choose what annuity is right for the consumer. There are several different annuities available, all of which offer different benefits and potential drawbacks. The only true way for a consumer to find the perfect annuity is to perform the necessary research to choose the annuity with just the right specifics to meet their specific needs.

How to Find Out Your Annuity Fund

We are living for longer today than ever before. At the same time, the cost of living is ever rising. Changing social and economic factors mean that planning your finances during retirement has become more important than ever before. After all, retirement is known as the golden period, when one should be able to enjoy the fruits of life’s labour. It is therefore vital to plan carefully and optimise your financial assets to provide for you when you stop working. Things like annuity value prove to be immensely significant during retirement, as an annuity is one of the most important, and often the only source of income for pensioners.

An annuity provides a regular and steady income in exchange for a lump sum. People usually invest their pension savings into an annuity scheme, which then pays out an income either for as long as you live, or for a pre-agreed period of time. How much income an annuity can offer you, or annuity value, depends on the size of your Annuity Fund, which is the amount invested in the annuity, as well as various other factors.

The most important factors that determines annuity value is the type of annuity you choose to invest in and the current annuity rates. Other factors include age, gender, and location. Depending on your health and lifestyle, you could also be eligible for an enhanced annuity, which has a higher annuity value based on the shorter than average life expectancy of the applicant.

Often an annuity is the only source of income during retirement, and so choosing the right annuity with sufficient annuity value is extremely important. Once you buy an annuity it cannot be changed or cancelled – so it is important to make the correct decision the first time around. An annuity offers a chance to make the most of your life savings, but choosing an annuity that underperforms or does not suit your needs could mean losing your life savings to an ineffective investment.

It is imperative to shop around and use the open market option to find the most suitable annuity with a sufficient annuity value. You can consult an independent financial advisor with expertise in the retirement sector to understand the implications of investing in different types of annuities and choosing the best option. You can also use online tools like annuity calculators etc. to find out the best annuity value you could get in exchange for your annuity fund.

Annuity Rules Are The Biggest Misconception

An annuity is an important tool in the retirement sector, which allows you to draw your pension fund as regular income during retirement. Investing your hard earned life savings into an annuity is a very important decision indeed, and it is vital to shop around not only for the most suitable annuity type, but also for the most suitable annuity provider for you.

The biggest misconception when it comes to annuities is that one is required to set up an annuity with their pension provider. The truth is that thanks to the open market option, there is absolutely no need to be limited to your pension provider for an annuity. In fact, the Government is trying to encourage people to use the open market option and shop around for the best annuity deal before investing.

Annuity rates can vary very widely between providers. Also, the variety of annuity products available means that different annuities will have different rates even from a single provider. So a company that offers the best rates with one type of annuity may not necessarily do so with a different type of annuity.

The first step towards finding the right annuity, therefore, is to understand your own needs and find out what type of annuity works best for you. For instance, would you need a single life annuity, or a joint annuity? Would you rather have a guaranteed income for life, or invest in a higher risk investment linked annuity? Would you need a fixed annuity with fixed payments for life, or an escalating annuity? These are some of the questions that need to be answered before you can shop around for the best annuity quote.

Your pension provider is bound to offer a quote, and there is no reason why you should not consider this quote, as there is every possibility that it will not only be competitive but may even be better than the open market options. The point is not to limit your options, but to shop around and make an informed choice about this important step in life.

The Financial Services Authority has worked hard to ensure that pensioners have the right to exercise an open market option and shop around for annuity quotes. The FSA continues to encourage people to use this option and has also made it mandatory for your pension provider to remind you of this option while offering a quote. That you must purchase an annuity from your pension provider is a myth, but thankfully, one that is continuing to diminish rapidly.