Q What is an Annuity?
A An annuity is the ‘income for life‘ arrangement you buy with your pension fund at retirement.
A Basically two.
1. Guaranteed Annuity
Q Can I make provision for my spouse?
A Yes you can arrange your annuity so that in the event of your death a continuing annuity will be payable to your spouse. Any amount between one third and the full amount of your annuity can be paid and this will determine how much you receive at the outset. A 50% spouses annuity would normally reduce the initial annuity by between 15 and 20%.
Q How can annuities be guaranteed for life?
A Because they are cross subsidised ie. those who die earlier subsidise those who live longer.
Q What happens if my spouse and I die shortly after the annuity starts?
A The annuity payment will finish. However you can build in a term guarantee so that the annuity will be payable 5 or 10 years from the start, even if both annuitants die before this time.
Q What determines the amount of annuity I get from my fund?
A Your age and any spouse’s age at the time that you buy. Also the level of increase you want the annuity to provide each year will affect the amount – the higher the increase the lower the amount at outset.
Q Will anything alse affect the annuity rate?
A Your life expectancy (and that of your spouse with a joint life annuity). If you have a health condition that will shorten your life expectancy you can probably obtain an increased rate of annuity. Some annuity providers also offer an increased rate for smokers.
Q How do I buy an annuity?
A You should seek advice from an IFA or a Specialist Annuity Adviser.
Q Are there any other options at retirement apart from buying an annuity?
A Yes. You can take Income Drawdown and/or Phased Retirement
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