What is an Annuity?
What is an Annuity?
An annuity is an income for life and it stops when you die – so it is important to get the most value out of your pension fund when buying your annuity. There are many options/styles of annuities.
The Financial Conduct Authority (FCA) advise you to shop around, but doing this for yourself is not an easy task as you need to be able to access all the annuity rates available from all of the insurers and you need to know what you want.
Is this annuity income just for you or does it need to continue to pay an income to your spouse if you die first? If so, how much? 100% or 50% or something else?
How much would that cost and what if you buy a spouse’s income and then they die before you? You could have wasted money!
What if you should die early? You can build in some protection to your fund, but how much protection would you desire and at what cost?
NOTE: If you have a medical condition that reduces your life expectancy, you may qualify for an Enhanced Annuity. To find out more see our dedicated page: Enhanced Annuity
Level Income or Escalating
Is a level flat annuity wise? This annuity income is to be paid for the rest of your life, if you live a very long time, your annuity will lose its purchasing power over time – so should you choose an escalating annuity income? If so, how much? 3% pa, 5% pa, RPI or something else?
What if you die soon into retirement? You’ll have taken a lower starting income when you could have had a higher income and enjoyed it. The decision is not an easy one.
There is a fine balance – taking your pension income far too early will have a detrimental effect on the purchasing power of your income. So many decisions! and that is why you need financial advice from an Independent Financial Adviser. Call us to discuss your needs without any obligation or contact us online and we will get back to you at a time that is convenient for you.
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