Annuities

Annuities provide a method of exchanging your pension fund for a promise of an income for the rest of your life or for a specified period. They are normally purchased from a life insurer or other financial institution.

The amount of income you receive will depend on the size of your pension fund, your sex, age, health, and the type of annuity you choose.

Annuities can be purchased on a single or joint life, level or escalating, payable monthly or annually, with the option to include a minimum guaranteed period or capital protection. Once purchased, an annuity cannot be changed.

In a great many instances an individual could improve the amount of income that they will receive by exercising the open market option. This is merely the option to transfer your pension fund from your existing provider to another provider offering preferable annuity rates.

Enhanced annuities are available to individual’s who can demonstrate a history of poor health or a lifestyle, which may reduce their life expectancy.  Examples would be include smoking, heart and lung conditions, diabetes and excessive alcohol consumption. These are sometimes referred to as impaired life annuities.

Temporary annuities offer an alternative to lifetime annuities, by allowing you to commit to an annuity for a limited period only. At the end of the initial period, e.g. 5 years, the annuity usually provides a guaranteed maturity value, which can then be used to purchase another temporary or lifetime annuity.  These annuities are sometimes called ‘third way’ annuities.

Investment Linked Annuities are for those who wish to continue to benefit from the prospect of future investment growth. Investment linked annuities provide a higher-risk alternative to guaranteed annuities.