annuities.

Annuities are insurance policies that pay income dependent upon a number of factors including age, sex, health and size of fund, and are not subject to mortality risk.

Payments are taxable and the policy holder must choose at the outset whether their spouse will receive the full amount of the original pension or a specified percentage.

making the right choice.

Buying an annuity is an irreversible decision and once bought, they cannot normally be changed, transferred or cashed in. This is why we highly recommend the open market option, and our advice will always be based on the individual’s needs and circumstances, as well as the financial strength of the annuity provider.

cutting the cost.

If we are asked to proceed with the annuity purchase, we will then manage the administration between providers and ensure that the annuity is established on the required basis. This process reduces the cost and hassle to you the employer and provides a valuable benefit for your company’s employees.

enhancing the service.

Any commission we may be entitled to receive from the annuity provider will be used towards the enhancement of annuity terms or reimbursed to the individual at their request. This is because at WEALTH at work, we only charge a fee if our advice is taken so there is no conflict of interest with any of our annuity recommendations.

What you need to know
  • Employees can exercise the open market option; they don't have to purchase an annuity from their existing pension provider
  • Current annuity rates are low compared to historic rates so the traditional decision to purchase an annuity at retirement may no longer be the best decision
Features
  • An insurance policy
  • Provides income for life
  • Single or joint life annuities can be purchased
  • Rate dependant on age, gender and employee's medical condition
Advantages
  • Provides certainty
  • Offers financial stability
Disadvantages
  • Irreversible decision
  • Tax payable on all income received
  • Pension pot lost on death - cannot pass on any remaining funds unless this is built into the annuity selected for a reduced level of income
  • Invested in gilts. The rate of return for these has been low over the long-term, meaning they may be an unsuitable investment now that life expectancies have increased
  • Inflexible. Although there are level and escalating annuities, these do not take into account future prevailing economic conditions or changes to personal circumstances

the different types of annuity.

 
 

conventional annuities.

A conventional annuity provides a guaranteed income for life. It is not subject to investment risk or affected by stock market fluctuation, house prices and any other investments. But any tax-free lump sum available from the pension fund must be taken at the beginning.

Specialist annuities are also available, such as impaired life annuities for individuals with a reduced life expectancy.