Pension Annuity Options
What are the options you have for your pension annuity? Here we have assembled an easy to understand guide that cuts through all the annuity jargon, discussing your annuity options in plain English.
What is an Annuity?
An annuity can be defined as a regular income guaranteed for life, provided by an insurance company in exchange for your pension fund. An “annuity” is purchased with the pension fund that has been saved from your pension contributions made whilst your are employed. Should you be signed into an occupational pension your employer they will in most circumstances arrange your annuity for you. However if you have a personal pension, you have the option of turning your pension pot into the annuity that best suits your needs. Your pension provider will contact you prior to retirement and offer you advice on their annuity services, but this is unlikely to be the best deal available, which is why you should shop around and use the “open market” option. Many annuity schemes allow you to release 25% of your pension fund tax-free at the start of the policy.
However you do not need to buy an annuity as soon as you retire from work. In fact you can wait until you reach the age of 75, when you must either buy one or get what is known as an Alternatively Secured Pension . Rates for annuities change on a constant basis, so check with Independent Financial Adviser as to what the best deal is for you.
There are many types of annuities (see below) and various hybrids of each. One thing to recognise is that when you buy an annuity you are exchanging your lump sum for a regular income. Because once you buy an annuity you are locked into it for good, which is why many people choose alternatives such as income drawdown also known as an unsecured pension. There maybe other possible alternatives to buying an annuity, so consult your independent financial advisor. Always shop around!
There are many options available when it comes to looking for an annuity, here are some of the main ones.
Conventional Annuity
Enhanced Annuity
Inflation Proof Annuity
With Profits Annuity
Variable Annuity
Fixed Rate Annuity
Unsecured Pension
Purchased Life Annuity
Smokers Annuity
Enhanced Annuity
Escalating Annuity
Single Life Annuity
Inflation-linked Annuity
Impaired Life Annuity
Value Protected Annuity
Short-Term Annuity
Joint Life Annuity