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    Pension Annuities Direct

Your Annuity Options

There are many things to consider when purchasing a pension annuity and you only have one chance of getting this purchase right, so we have listed below some of the things that need to be considered. We hope this is useful but as always just pick up the phone if you are not sure and we would be delighted to talk it through with you.

Once you are happy that a pension annuity is the correct option you need to consider how you would like your annuity to be set up.

The options available are listed below. You can chose as many options as you wish. Each option will affect your immediate pension income level. Please refer to the examples provided to see how income can be affected.

The impact of the options will vary in each case. Let us know your preferred options and we can provide quotes accordingly to enable you to make a right decision.

 

 

Single or Joint Life?

If you are married or have a partner that you cohabit with you may be able to provide for them from your retirement income if you wish, this is called a joint life pension.

There is an impact on your pension as the amount you will receive will be less as the annuity is providing for two people. You can choose what percentage you would like your spouse to have and the greater percentage the less you will have as a pension annuity.

Traditional final salary schemes used to typically provide for a 50% spouse benefit. Most providers offer standard levels of provision at 50%, 66% and 100%, however if you wished to provide a different level we can obtain quotes for you. To understand the impact on your pension annuity by taking a joint life annuity please see the example to the left.

If this benefit is of interest please speak to one of our team so that we can obtain formal quotes for you so that you can make a better judgement.

Escalation/Index Linking

Over the years inflation will reduce the value of your annuity. Please see the impact of inflation in the example below. You have an option to protect some of the value of your money by purchasing an annuity with escalation.

The normal options available are yearly increments up to a maximum of 5%, the RPI option pays out at inflation levels up to a maximum of normally 5%.

The escalation option does again reduce your immediate income by varying degrees dependent on the amount of escalation required. To see the impact this has please look at the chart to the right. If this benefit is of interest please speak to one of our team so that we can obtain formal quotes for you so that you can make a better judgement.

The value of £1000 based on inflation at 3% per year

Today £1,000
After 10 years £737
After 20 years £544

 

 

 

 

Guarantees

Another way of providing for a spouse or dependant is by electing to have a guaranteed period of payment. This ensures that the annuity will pay out in full for a certain period of time even if you were to die.

There are two periods of time that you can normally choose one being 5 years and the other being 10 years. If you were to die whist your annuity was in it’s guaranteed period the full amount of the annuity would continue to paid to your estate. This option again reduces your annuity income please see graph to the left which demonstrates the typical reductions.

You can choose this option as well as joint life if you wish. If this benefit is of interest please speak to one of our team so that we can obtain formal quotes for you so that you can make a better judgement.

Frequency of Payments

You are able to have your annuity income paid monthly, 3 monthly 6 monthly or annually. You can have this paid in advance or in arrears. Some companies find it more difficult to pay other than monthly and therefore the costs are greater and the rates that you receive are less than if you were to receive the income monthly.

There is little difference in the income paid whether you take it in advance or arrears.

Summary

Please consider the options above, the decisions with the biggest impact on your possible current earnings are
whether you would like joint or single life cover and whether you would like any escalation to protect against inflation. Once you have considered your family circumstances you can decide which option is best for you.

A single life annuity with no options provides maximum income. If you are happy to sacrifice a small amount of income you can purchase a guaranteed payment period. If you are reliant on this income for the future you may wish to protect the value from inflation by applying escalation.

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Case Studies

  • Mr T earned 21% MORE Pension Income

    Mr T was 55 years old and had a pension pot of £200,000. He wanted a single life annuity with a guarantee on the policy but no escalation. He has some lifestyle conditions and health issues, he is a heavy

    Read More…

  • Mr H earned 29% more pension income

    Mr H was 60 years old and had a pension pot of £30,000. He was a smoker and is taking medication for Cholesterol, although his readings were fine and he also suffered with vertigo. He wanted a single life annuity

    Read More…