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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
• JOINT OR SINGLE Life Annuity
If you are single then you want a single life Annuity. But if you have a partner the decision comes back to your Budget. Work out what income your partner would have without this annuity and review your budget based on just him or her. You should then be able to work out what income your partner might need from this Annuity.
There are three levels of income available to a surviving partner. Level i.e. your Annuity continues for the rest of your partner's life. Reducing by 1/3 rd , so on your demise 2/3rds of your Annuity carries on for your partner and reducing by ½, i.e. ½ of your Annuity carries on for a partner.
As you might imagine the ½ Annuity for a partner gives you the highest income immediately and the level Annuity the lowest. If you choose any joint Annuity and your partner dies first you have effectively lost the money buying an income for them they are not here to enjoy.
A lot depends on your respective ages, health, family life expectancy and budget. See Phasing and perhaps Drawdown. If you need a Joint Annuity, reducing by 1/3 rd is probably the best compromise.
• NON-INCREASING OR INCREASING Annuity
This depends on your budget, life expectancy, your age today, your lifestyle and inflation. The main decision is between a high Annuity now that does not increase and an RPI linked Annuity that increases each year but starts off quite low.
If you and/or your partner (if joint Annuity) expect to live for 25 or more years it is almost certain that at some time in that period we are going to experience high Inflation which could destroy a non-increasing Annuities' buying power. An RPI Annuity would maintain its buying power from the day it starts. As an RPI linked Annuity starts much lower than a level one, you might pay less income tax now.
However, the chances are that you will spend more money today than you will in future on travel, holidays etc. So you really could do with the higher non-increasing income today. At say 2.0% p.a. inflation it could take an RPI Annuity 12 years or more to catch up to a Non-increasing Annuity.
? Joint Life annuity yes/no If yes Level/reducing by a third or a half
Annuity Purchase
