Looking for the best annuity?
Need some help?
Here are some questions and answers Annuity Helpline have put together to help you. Annuity Helpline is not a financial services company but an 'information only' site, although we do have access to some of the most experienced industry experts in the UK.
Here are some questions and answers that may help you:
Should I buy an annuity?
If you do not want to take any risk with your money and you would like a guaranteed income for the rest of your (and or your partners) life then only one product will do, at present that is an annuity.
I have heard annuities are poor value, are they?
This depends on how long you live: If you purchase a standard annuity and live to be 110 then they are excellent value, if you died next year then yes, poor value as you would not have received back the money invested. However, now you can add something called 'Value Protection' when purchasing an annuity which will guarantee you will not lose any money regardless of when you die.
What is 'Value Protection' (VP) and how does it work?
Value Protection is very simple; if you have a pension fund of £30,000 and died after having received £10,000 of the £30,000 invested in the annuity then a Value Protection payment will be made of £20,000 to ensure you do not lose any of the original fund invested. If you die before age 75 then the £20,000 would be paid totally tax free. If you are over age 75 then the person receiving the £20,000 (and it can be more than one person splitting the money) would pay ‘income tax’ as if that £20,000 was their income.
What types of annuity are there?
- Conventional good health annuity - Paid for life and can include a partner and or Value Protection.
- Impaired life, poor health, smoker, lifestyle annuity - Paid for life and can include a partner and or Value Protection.
- Fixed Term Annuity – Annuity paid for a fixed number of years determined by you.
- Asset backed annuity - Paid for life and can include a partner and/or Value Protection, but the amount may fluctuate a little each year depending on how well the investment backing the annuity does. An asset backed annuity could help protect future income against the effects of inflation over time.
If you would like to do your own free Online LIVE annuity quotes
What options are there other than an annuity?
Pension Drawdown is the only real alternative and works just like a bank account. You invest your money and then draw an income from that money. The two big things you must research when entering Pension Drawdown are:
a) How will you be charged, which can have a big impact on your money?
b) Where is your money going to be invested? It could be invested in anything from a very low risk bank account to very high risk stocks and shares ‘portfolio’, ultimately you will decide.
Making the right decision for your future is extremely important, and potentially a life changing one. If you would like to discuss your options in more detail or would like some help understanding this topic, please call us free on 0800 888 6564 or email us at email@example.com.
Please be aware however we are not a financial services company, we do not and cannot give any sort of advice. We are able to refer you to a number of industry experts in the UK if you would like some help, who do not charge for an initial discussion.
Can I take all my money out?
From 6th April 2015 the answer is yes! 25% of what you take is currently tax free and the rest is subject to income tax at the rate you are paying now. This may result in a big tax bill and we can help you understand and minimise this tax payment.
Still have questions?
The budget in 2014 is set to revolutionise how everyone will buy an annuity. We can give you the most comprehensive 'best annuity' comparison quotes available anywhere in the UK through this link: http://www.i-retirement.co.uk
This quote service for finding the best annuity is totally free, there is no charge here for helping you find the best annuity for you. Finding the best annuity is quick and easy. This comparison service is to help you to find the best annuity for you in just three simple clicks using the link above.
Best annuity rates can be hard to understand but below is a 'best annuity' guide to help you make an informed decision; it may affect a quarter of your life, so finding the best annuity is possibly one of the most import at decisions you will ever make.
Different 'types' of annuity as described above, there are two main 'types' of annuity:
1. Conventional Annuity
This is where an income is paid to you for the rest of your life whether that be in 5 years or 50 years. Many people think of a conventional annuity as 'longevity insurance'; insurance against living a very long time in retirement.
You also may be entitled to impaired/enhanced/smoker/lifestyle annuity rates. This is the same as the conventional annuity, but the amount you get is determined more specifically on how long the annuity provider things you will live based on your health and or lifestyle. Simply put, the shorter your life expectancy, calculated by the provider by taking into account your health and lifestyle, the higher the annuity you will be offered by that provider.
The longer you live the better you will do from a traditional annuity, and it is the only product in the market that will give you a guaranteed income for the rest of your or your partners life.
Annuities do have a downside, you may die sooner than expected and not even get your money back. But since the budget in 2014 you can now remove this risk by adding/including 'Value Protection' (VP). This option guarantees that if you do die early any remaining pension fund you have not received can be paid out in cash to your estate or named individual (maybe your spouse).
Annuities are also irrevocable; once you have purchase your annuity it cannot be changed, regardless of what happens to you. If you purchase an annuity and tomorrow you are diagnosed with terminal cancer you would not be entitled to the enhanced rates as the policy cannot be changed. This is why Value Protection is now such an attractive benefit and one everyone taking out an annuity should seriously consider.
The last major downside to an annuity is inflation. At 4% inflation 30% is wiped of the value of your annuity in just 10 years and after 30 years it has lost 75% of its value. It is also possible that high inflation experienced in the 1970's could return (economics is often cyclical) then a level annuity would soon become a fraction of its former value.
Pros of an annuity are:
Cons of an annuity are:
- Irrevocable product
- Premature death (unless you have VP)
- Inflation risk
2. Asset Backed Annuity
Very similar to the conventional annuity but the amount of annuity you receive is determined by the asset(s) you choose to back your annuity.
The most common type of asset backed annuities are with-profit annuities. These type of annuities are not popular but are well worthy of consideration. Before you dismiss them and to make a proper informed decision it is very important you understand how they work, and how they can benefit you. Please call us on 0800 888 6564 for a full explanation of how these annuities work and a review of past performance.
Pros of an Asset Backed Annuity:
- Payable for life
- Can help to hedge against risk of inflation
- Certainty of payment
- Can be backed by some robust funds that have performed historically
Cons of an asset backed annuity
- Semi irrevocable in that you can usually convert to a conventional annuity but it has to stay as an annuity
- Premature death
- Income can go down as well as up if the asset does not perform
There are also what are called 'fixed term annuities' that are not really annuities but income or pension drawdown, but they do have some annuity features in common that the income and the resulting fund after the fixed term are guaranteed. Again to know more about fixed term annuities please see below.
1. Income or Pension Drawdown
Quite simply 'income drawdown' is like putting your money in a bank account then drawing the money out when you want it. It really is that simple. There is of course a lot more to it but this is the main principal.
Pros of income / pension drawdown:
- Your fund in your control
- Take out what you want when you want (subject to current limits)
- Death benefits for partner or anyone you want (subject to tax if paid in cash)
Pros of income / pension drawdown:
- Can be expensive if you don't shop around and or take advice
- Asset backing your fund can perform badly losing you money
- You can run out of money
2. Uncrystallised Fund Pension Lump Sum or UFPLS (Available from 2015)
This is very similar to Pension Drawdown but the death benefits are different in that your remaining fund can possibly be paid out in cash tax free. The general rule here is that this type of retirement income would benefit those who are not in best health and single.
Pros of UFPLS:
- Your fund is in your control
- Take out what you want when you want
- Death benefits for partner (or other named persons) tax free
Cons of UFPLS:
- Can be expensive if you don't shop around and/or take advice
- Asset backed funds can perform badly
- You can run out of money
- You could lose any tax free cash not taken should this benefit be removed in the future.
Above are most of the retirement income options available to you and with such a once in a lifetime decision whether you seek advice or not you should read and try and understand every option available. Many of the best annuity products are irrevocable and therefore making an informed decision is crucial.
Disclaimer: This website is for information only. It is not the site of any regulated firm and is not authorised or regulated by the Financial Conduct Authority. The site and no-one connected to it can or will give any sort of financial advice and any attempt to do so would be a criminal offence and should be reported to the FCA.