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INDEPENDENT FINANCIAL ADVICE CENTRE
You should remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of units, and the value derived from them, to fall as well as rise and you may get back less than you invested when you decide to sell your units. The tax treatment of investments and pensions is not guaranteed and may change in the future.
Your home is at risk if you do not keep up the payments on a mortgage
If you have worked out your budget, can manage on a lower income now and expect to live to a good age consider an increasing Annuity. Vice versa!
(7) INCREASING AT
The higher the level of annual increase you choose the lower your starting Annuity income. These days, with low inflation, non-increasing Annuities are proving very popular.
There is a danger that RPI could actually go negative in which case your RPI Annuity income could fall! In the long term this is unlikely but it could happen. Choose regular 5% increases if this worries you or RPI if you think inflation will be much higher in future.
There is normally very little difference between 3% & 5% in terms of starting income so go for the higher figure.
(8) PROTECTED
As explained earlier you can ensure a minimum number of annuity payments are made, normally a choice of either 5 or 10 years. If you are having a single life pension and you have family, protection is a good idea. Imagine buying an annuity with say £50,000, receiving one months income of say £280 (net) and then passing on, the family would get nothing.
However with a protected 10 years annuity, a further 9 years 11 months payments would be made to your estate i.e. ((9x12)+11) x £280 = £33,320, which is better than losing £50,000!
It makes very little difference to the income so is well worthwhile in some cases.
If you are having a joint life level income annuity, protection is not really needed as the income will continue as long as either of you is alive but if you have kids go for protection, its better for them to have some money if you both die young rather than the Insurance company.
(9) Flexible or Secure
A secure Annuity means your income will arrive every month with no risk whatsoever. It does not matter, within normal reason, what happens to Interest rates, stockmarkets etc. So if you simply must have this Annuity income in order to live choose secure. (If the whole financial world collapses your annuity would stop. Nothing can ever be that guaranteed except “Death and Taxes”!)
? do I want a non-increasing or increasing annuity yes/no. If no go to (8)
? The annuity should increase at 3% p.a., 5% p.a. or RPI?
? Protected Annuity No/5 years/10 years.
Annuity Purchase
