subject: Which pension annuity is right for you? [print this page] Which pension annuity is right for you? Which pension annuity is right for you?
Once upon a time there was a pension fund, which employees would collect after having put in a lifetime of laborious years at their company. The pension fund was a lump sum to provide for retired life, so that the employee could maintain the standard they had while still employed. Now, however, things have changed, and you can easily exchange your pension for an annuity in the open market. A pension annuity serves you much better than a pension since it guarantees you an income for the rest of your life as long as you live. However, with so many different types out there, it can get a little confusing. This article tries to clear the air.
All types of pension annuity are similar in the following ways:
You will convert your capital (pension fund) into regular income
You will receive regular income as long as you live.
That said, there are different types of annuity, based on the nature of the income you seek.
Lifetime Annuities: These guarantee you a regular income for the rest of your life and are by far the most popular pension annuity. Lifetime annuities also offer two extra options. You can opt for a Joint Lifetime Annuity as opposed to Single Lifetime Annuity to continue payouts to your spouse/partner or any dependent after your death. You can also choose between Level Lifetime Annuity which provides you with the same amount of income year after year, or Escalating Lifetime Annuity which pays out less during the first few years and increases every year.
Enhanced Annuities: These give you a higher income than normal annuities if you are suffering from a condition that may affect your lifespan. For instance if you have cancer or asthma or have already had heart attack, you could qualify for an enhanced annuity. These days, even individuals who smoke regularly or are overweight are eligible for an enhanced pension annuity.
Protected Rights Annuities: These are meant if you entered into a pension annuity agreement with the SERPS, and created a pension fund out of your rebates. Qualifying for protected rights annuity provides certain benefits to individuals, and your provider should be able to tell you how these translate for you monetarily.
Investment-linked Annuities: A lot of people would like their annuity to be more of an investment than just a saving, therefore, they opt for investment linked pension annuities that are invested into the stock market. With these annuities you have the option of linking your annuity to the funds that you invest in, in the stock market, called as Unit-linked Annuities or they can be linked to the annuity providers in-house investment fund.
Each of these pension annuity types satisfy a specific niche and you can choose one that fits you best. While a lifetime annuity is great to cover most of your needs, you could also look at adding an enhanced or investment annuity to it, by shopping for annuities through an intermediary/broking website that helps you compare quotes from all the leading providers in the UK. This can happen in a matter of minutes and with a few details, so that you quickly have the information you need to ensure your retirement is smooth and comfortable.
