Tag Archives: Type of Annuity

Shake the Hand of the Annuity Provider Offering the Best Annuity Deals!

With annuity rates being depressingly low, those on the verge of investing in an annuity are facing a dilemma – wait for the rates to improve, or choose from one of the annuity deals available now and make the best of it. Keep waiting and hope that you get a better deal, or shake the hand of the annuity provider offering the best deal right now?

Annuity rates depend on a number of complex factors, and according to financial experts, the rates are not set to improve significantly, at least in the short term. However, there could be tiny fluctuations in the rates from time to time. But delaying investing in an annuity may mean that the lost income due to the delay may be far bigger than any gains from small fluctuations in rates.

Even though rates may be low at the moment, there are various types of annuities available on the market, and you can find a product that best suits your needs and offers an income that you are comfortable with. A financial advisor can guide you through all the types of annuities, as well as your own needs and make an informed choice.

Waiting for better annuity deals may prove to be a bad idea on three levels. One – it may mean that you lose out on regular income due to the delay, two – while you are waiting for annuity rates to improve, rates may go even lower, and three – any attractive deals and offers currently available could be withdrawn without any notice. Unnecessarily delaying investing in an annuity in the hopes of better annuity deals may therefore mean that you not only find a better deal but also make a loss in the process.

Popular financial products being withdrawn is not without precedence. The Halifax Retirement Home Plan is a good example of this. The Halifax Retirement Home Plan was a highly popular mortgage that was withdrawn without any notice in August 2011. This was the only flexible interest only equity release plan of its kind at the time and left a lot of people who were interested in it without any other option.

In fact, annuity rates, annuity deals and indeed annuity products can be withdrawn, updated or changed on a day to day basis. Waiting for rates to improve may mean that you not only have to commit at a lower rate in the future, but could also mean that you do not get the specific type of annuity that you wanted in the first place.

Some Helpful Advice on Annuities

When you retire, or just before, you will be looking into ways to make your savings and your pension last for as long as possible. There are a number of investment options that you can make, and there are various ways to make your money last: one of these is an annuity. Annuities can seem complicated because there is so much information available and it can be difficult to sift through all of that to the details that you really need to know. So here is the information on annuities that you really need to know.

An annuity is a financial product that you can purchase when you retire. You have the option to take all of the money that you have saved in your pension and use it to buy an annuity. That annuity will then guarantee you a regular income for the rest of your life. You should not take the first annuities deal that you come across, even if it is offered by your current insurer. You absolutely must look around for the best possible annuities rate and the best deal. When you purchase annuities, the insurance company will use that money to buy gilts, the return from this investment is what makes up your regular income.

This is why it is so important to get the best annuity rate of return that you can; in addition you cannot get the money back once you have bought an annuity. There are a number of different kinds of annuities which you can choose from but it is in your best interest to look into an enhanced or impaired annuity. With annuities of this kind, you will receive a better annuity rate because your life expectancy will be less. People who are smokers, who are overweight, suffering from certain medical conditions or who are on prescription medication should apply for this type of annuity. This goes too for people who have been in hospital recently or who have a history of heart disease or cancer.

There are other kinds of annuities that you will have to look into, you can choose between a fixed annuity where you get a fixed amount every month that does not change and an index linked annuity which changes with the stock market. You can also get an annuity that increases with inflation. There are many options but the key thing to remember is to do your homework about annuities and shop around for the very best deal.

Can I Have a Tax Free Annuity?

There is no such as a tax free annuity. However, in a way, everyone can receive a kind of ‘tax free’ annuity, thanks to the tax free lump sum from your pension pot that you can use to purchase an annuity.

Currently you are able to get up to 25% of your pension pot as a tax free lump sum, which can then be used as an annuity fund to invest in an annuity scheme. An annuity scheme turns the lump sum into annual or monthly income during retirement. However, it is important to note that annuity income, which is the income you receive from an annuity provider, is treated as taxable income. This means that although your annuity fund can be tax free, it is not entirely a tax free Annuity, and the income you actually receive from the annuity provider is taxed by HMRC.

The amount is taxed at the appropriate tax band, depending on how much money you receive from the annuity. The annuity provider will deduct the tax before you receive the payment. The fact is that for most pension schemes today – the pension savings need to be converted into an income by investing the money into some investment product. This could be an annuity or an income drawdown plan.

An annuity is where the savings are converted into a regular income and an income drawdown plan is where you withdraw money from the savings as and when you need them. The advantage of an annuity is that although the income is taxed and there is no such thing as a tax free annuity, it is guaranteed for the agreed term of the annuity and you receive it at regular intervals. Depending on the type of annuity you can receive a taxable income for as long as you live, or until the end of a fixed term.

While annuity turns your savings into guaranteed income, income drawdown keeps your savings invested in external investments like stocks and shares, and you can withdraw the money as and when you need additional income. This is also taxable as per the appropriate tax band.

A tax free annuity does not exist in the sense that the income from an annuity is always taxed. However, everybody is entitled to a tax free lump sum from their pension savings which can be used to generate an income during retirement, either through an annuity or through an income drawdown plan.