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The Pension Drawdown Company specialises
in providing advice on all aspects of pension
drawdown and investments

 
 
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Annuities and Annuity Options

An annuity is an income for life that is purchased from an annuity provider, generally an insurance company, with a capital sum i.e. a pension fund. It can be purchased with the entire pension fund that is available or it can be from funds after the tax-free cash that you are entitled to has been taken.

You can choose to have the income on a level or escalating basis, to have a dependants pension payable after your death and to build in a guaranteed period when the full amount would be paid. Any addition that is made to the annuity will lower the amount of the initial payments.

Open market option

The first choice that needs to be made is whether the annuity should be purchased from the company that you have your pension funds with, or should you use another company’s annuity by exercising your “open market option”. It is quite feasible that the company that your pension fund is with will not have the best annuity rate. The best rate, and therefore the amount that you will receive for the remainder of your life and possibly your dependant’s life, could be as much as 50% higher than the worst.

Is your annuity the best available? Contact us for a comparison

Enhanced and impaired

It is also possible that you may be entitled to an annuity that is higher than the standard rate because of health or lifestyle considerations. These are known as impaired or enhanced annuities. There are over 1,000 medical or lifestyle conditions that could lead to as much as a 30% increase in your income in retirement over the standard rate. It has been estimated by a leading provider of enhanced and impaired annuities that 40% of pension annuities could benefit from these higher rates, but currently only 4% do.

The best standard annuity could be a 50% improvement over the worst, and an enhanced or impaired annuity could offer an even more substantial advantage.

Could you qualify for an impaired or enhanced annuity?

Contact us to see if you qualify

 

Annuities - Advantages

  • guaranteed income
  • simplicity
  • no investment risk
  • security

Annuities - Disadvantages

  • basis of income fixed at the outset
  • income level and timing is fixed at the outset
  • all regular income is subject to income tax
  • you can no longer contribute to the fund after retirement
  • loss of benefit and capital on death
  • no further benefit from investment growth
  • fluctuating annuity rates
  • low annuity rates at younger ages

Contact us for a personal illustration

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When you become a client of The Pension Drawdown Company you will be able to have on-line access to up to date valuations for all your funds.

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