What is an Annuity?
Essentially an annuity is a monthly income that is provided from the pension pot that you have been saving into during your working life.
You usually 'purchase' your annuity when you decide to retire and that will provide you with a guaranteed monthly income for the rest of your life.
It is always advisable to shop around for your annuity and not just take the annuity that your pension company offers. Rates do vary according to your circumstances.Sometimes it is more appropriate to take a fixed term annuity with all or some of your pension pot. A fixed term annuity is just that - it pays a monthly income for a pre-specified period of time.
The amount of income an annuity will pay will depend on :
- the amount of money in your pension fund
- your age, sex and health
- the type of annuity you choose.
You can delay purchasing your annuity until you decide you need the income, but from April 2015 it no longer has to be finally purchased by the time you are 75.
The income that you get at the start of an annuity is higher the older you are because the companies are assuming that you won't have as long to live.
Tax free lump sum or Pension Commencement Lump Sum. You can take up to a quarter of your pension fund in cash, as a tax free lump sum. You should ask your pension fund administrator how much you are entitled to.
Contact us now and get advice from a annuity qualified independent financial adviser to help you decide which type of annuity is for you.