Annuities Explained

Annuities are essentially a financial product provided by insurance companies that allow people to exchange a lump sum of money for a regular income. While anyone can technically buy an annuity, the first time most people do so is when they are about to retire.

More often than not, annuities are purchased using a pension fund. After years spent paying into your pension pot, you’ll need to convert it into something that will offer a guaranteed income. The most common type of annuity purchased with a pension fund is the Compulsory Purchase Annuity. With this product, you are paid a monthly income that is guaranteed for the rest of your life.

The income you receive from an annuity depends on how much you put in and your life expectancy. Annuity rates are usually quoted as a figure you’ll receive per £10,000 or £100,000 you put in. So, if you’re quoted, for example, £200 for every £10,000 you put in, this would mean you will receive £200 every month for every £10000 you pay in as a lump sum. So £20,000 (at this rate) would see to it that you have a monthly income of £400 per month, and so on.

Advantages of an Annuity

The main advantage of an annuity is that it provides you with an income that is often guaranteed for the rest of your life. This means that you will never have to worry about not having an income during your retirement.

When you reach retirement age and can no longer work, an annuity can be the main source of income for you.

Another benefit is that there are so many different types of annuity out there, that you often have a range of options according to what best suits your needs.

Disadvantages of an Annuity

Annuities are such that once you’ve paid your lump sum in, you won’t be able to get it back. Of course, this means that if a retiree dies soon after they have paid in a big lump sum, the money they get back might not be close to the amount they paid in. This, however, is the nature of annuities and the potential of earning a guaranteed income for the rest of your life often outweighs this risk.

Getting the Best Annuity Rates

You don’t have to settle for the rates quoted to you by your pension provider. You are entitled to shop around and find the best rates! And if you’re a smoker or have certain pre-existing health conditions, you could even qualify for higher rates through an Enhanced Rates Annuity.

Let us find the best annuities quote for you.

Annuities Explained Links

• What Happens to my Annuity When I Die?

• Get Annuity Quotes

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• What Happens Next?

  One of our expert advisers will review your information and get in touch. We‘ll then search the entire market to return the best annuity rates for you, according to your own personal circumstances.

  04-FEB 2012

• Who are we?

  Retirement Solutions Limited is a Specialist Independent Financial Adviser. We aim to be a one-stop shop for all retirement income solutions.

• Accreditations

  Annuity Rates is a trading style of Retirement Solutions Limited, who is authorised and regulated by the Financial Services Authority.

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