Annuities

What is an annuity?

An annuity is a type of insurance which enables the policyholder to enjoy a regular income in exchange for a lump sum of cash. This lump sum is built up through a pension scheme, and those with a pension must buy an annuity by the time they reach the age of 75. Those on final salary schemes with a work's pension may not have to do this.

The amount that you are paid as part of your regular income is dependant on the insurer's estimation of how long you will live, the annuity rates, and the amount of your pension fund.

What are the advantages?

• Provision of a regular income upon retirement
• Choice of annuities available to suit your needs - Joint life annuities available
• Income paid at intervals to meet your needs

The advantages and benefits will depend upon the type of annuity you select. We recommend that you research this subject very closely and consult us prior to selecting an annuity to ensure that you get the one that best meets your needs and circumstances.

What are the disadvantages?

• Lower rates on annuities for women, due to increased expected life span
• Falling annuity rates could reduce the amount that you receive from your pension
• Not very flexible, and unless you have selected a flexible scheme, you could be tied to the policy

The disadvantages will also depend upon the type of annuity you select. We recommend that you research this subject very closely and consult us prior to selecting an annuity to ensure that you get the one that best meets your needs and circumstances.

Important note

Remember that you must buy an annuity by the time you reach the age of seventy-five, but until then you may have other options with regards to enjoying a retirement income. If you do decide to buy an annuity upon retirement, you should ensure that you check policies, rates, restrictions, and benefits very carefully, and if necessary seek advice from an independent financial adviser. Investing in the wrong annuity scheme could cost you a great deal in annual income, so make sure that you look into this subject carefully before you make any commitment.

A pension is a long term investment. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.