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Annuity Options

 

We suggest you read our Introduction to annuities before you read this section

Annuity options in detail

An annuity pays you an income for your life time with the amount payable depending on the options available and which you feel are important to you such as:

Guaranteed Period

If you select a guarantee period and you die within the period chosen, payments will continue for the balance of time remaining. It may be possible for the remaining instalments to be paid as a lump sum. Normally the guarantee period will be either 5 or 10 years.

Capital Protection

This option allows for a return on death equal to the difference between the cost of annuity purchase and the gross income payments received, less a flat 55% tax charge.

Level of Escalation

A level annuity pays the same amount of income year after year. It pays a higher income compared to the initial starting income available under an escalating annuity, which will take a number of years to catch up and exceed a level annuity.

An escalating annuity is designed to increase each year and the greater the level of escalation chosen, the lower the initial income. It is possible to select a fixed rate of increase each year normally in the range of 3% to 8.5%. Alternatively, you can choose to link increases to reflect changes in the Retail Prices Index (RPI). However, your income is not guaranteed to increase each year as the RPI may not rise and if it did fall, so would your income.

Survivor’s Benefits

A joint life last survivor annuity pays out until the second person of a couple dies. It is possible for the annuity to continue at the same level to a survivor but most couples elect for an income between 1/3rd and 2/3rds of the original amount.

Proportionate Payment

When you die, an annuity with proportion will pay an amount proportionate from the last payment until the date of death. This is most valuable when income payments are made on an annual basis. This option is only available for payments made in arrears.

Frequency of Payment

You may select at the outset how often you want to receive income each year. Most people choose monthly, but you can be paid quarterly, half-yearly or annually. Payments can be made either in advance or arrears.

Guaranteed Annuity Rates

Some annuity providers have guaranteed annuity rates written into their contracts which will provide you with a considerably higher income than would normally be available. If such rates are available it is often the case that the benefits must be taken in a certain form i.e. single life, yearly in arrears.

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If you feel that you need some help from a financial advisor, then visit our section on obtaining financial advice, or our page on Laterlife selected services and associated advice.

   
 
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