UK Annuities: FINANCIAL CONDUCT REGULATED SITES • QUALIFIED, TRUSTWORTHY ANNUITY ADVICE
Centralising Your Pension Annuity Search
These well-known and trusted brands represent a selection of possible pension annuity providers and income drawdown providers. Please scroll down to visit a choice of FCA registered annuity advisers that are authorised to sell annuities for these companies...
Visit Open Annuities Financial Services Register Number 530750
Visit Pension Annuity Plan Financial Services Register Number 530750
Visit Annuities Plan Financial Services Register Number 530750
Visit Pension Annuity Planner Financial Services Register Number 530750
Visit Annuity Base Financial Services Register Number 530750
Visit The Enhanced Annuity Financial Services Register Number 483817
Visit Annuity Comparisons Financial Services Register Number 483817
Visit Annuities Extra Financial Services Register Number 483817
Visit Simple Annuities Financial Services Register Number 483817
Visit The Female Annuity Financial Services Register Number 460094
Visit Annuity Pathway Financial Services Register Number 460094
Visit Just One Bite Annuities Financial Services Register Number 460094
Visit Pension Annuities Plus Financial Services Register Number 483817
Visit Annuity Answers Financial Services Register Number 483817
Visit Smokers Annuities Financial Services Register Number 483817
Visit Annuity Key Financial Services Register Number 460094
Visit Buy an Annuity Financial Services Register Number 154622
Visit Annuity Office Financial Services Register Number 483817
What actually is a pension annuity?
(Please note that the following is not intended as advice and an FCA registered broker should be consulted before making a decision regarding pension annuities and annuity alternatives)
A conventional pension annuity is an arrangement where you make a lump-sum investment. From this investment you'll receive a guaranteed level of annuity income. There are also alternative forms of annuities that provide a greater degree of flexibility. Most annuities are bought using funds held in money purchase pension schemes.
So basically, an annuity converts a savings fund into income and that income will be paid to you as long as you live.
An annuity is payable for your lifetime after purchase, although it's possible to select a fixed period if purchasing an annuity with cash rather than pension funds.
An example of this type of "Compulsory Purchase Annuity" is a conventional annuity, with profit annuity and unit linked, or 3rd way annuity. An annuity that is purchased from savings, not from a pension scheme is referred to as a Purchase Life Annuity or Immediate Vesting Annuity.
This could be one of the biggest financial decisions you'll ever make, so ensure that you maximise your annuity income. Once you buy an annuity you can't change your mind so you need to make sure you get it right first time.
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Types of Annuity: Tailored to suit you personallyThere are a wide range of options which can be selected when choosing an annuity plan. The most widely used annuity options are listed below.
Annuity income is guaranteed to be paid until the death of the annuity holder, but it can also be modified to include any of the following options:
• 5-year guaranteed annuity - annuity ceases at death of annuity holder, or after 5 years, whichever is the longer
• 10-year guaranteed annuity - annuity ceases at death of annuity holder, or after 10 years, whichever is the longer
• Joint life annuity - annuity ceases on the death of the second of two named annuity holders
Your spouse, partner or dependant can be protected after your death by choosing one of the following options:
• Reduction to half benefit,
• reduction to two thirds benefit or
• full benefit
The annuity is thus adjusted to the new level at the death of the annuity holder or at the end of the guarantee period (if selected) and continues until the death of the spouse, partner or dependant.
An annuity can either be paid at a fixed level or can include an escalation at 3%, 5%, or at the RPI percentage (annual increase in the retail price index). You can thus choose to compensate for any inflationary effects on your income. However, your initial income level will be reduced if you choose escalation. Your specialist annuity adviser can look at a range of annuity options for you to help you decide on the best option for your individual circumstances.
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Purchased Life Annuity: An annuity with a differenceA purchased life annuity is an annuity purchased with your own funds, as opposed to from a money-purchase pension fund. It operates in the same way as a compulsory purchase annuity, but it does have tax advantages over a conventional annuity.
The entire pension that you receive from a compulsory purchase annuity is treated as taxable income in the same way as income from any normal employment would be. However when you buy a purchased life annuity, that part of the annuity income, which is calculated as capital repayment to you, is tax-free. Only that part of your annuity income that is interest paid on your investment is taxable.
With similar annuity rates, the effect of this tax treatment of a purchased life annuity, for a basic rate tax payer from a £200,000 investment would be to increase their net annuity income by approximately £200 per month.
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Take advantage of The Open Market OptionThe open market option allows those who retire to shop around for different ways to convert their pension funds into an annuity, as opposed to just accepting the annuity rate offered by their pension provider.
When your pension fund reaches maturity, your pension provider will advise you of the fund value and give you general information about annuities and the level of annuity income you would receive.
You are then entitled to use your open market option, which allows you to transfer the pension fund value to another annuity provider of your choosing. This enables you to take advantage of a higher annuity income which may be available from a different provider. Annuities are usually provided by insurance companies.
You could receive more annuity income from a pension annuity than you think. You may be able to get a better annuity rate by shopping around. You should check what your provider is offering you and then compare this with the annuities on offer through the open market.
However, many retirees still don't use their open market option to buy an annuity. This is not just because they are unaware of the benefits of doing so, but they don't actually realise that they have an option. It's been claimed that those at retirement who don't use their open market option, taking the default annuity offered by their pension provider, may be missing out on up to 40% more annuity income.
According to the professional pensions publication, DC World, it is estimated that over £1 billion in pensions was lost by failure to get proper advice on the best-selling annuity.
To make the most of the Open Market Option it is important that you speak to an Independent Financial Adviser (IFA) who will explain the different annuity (or alternatives to annuities) and retirement options available.
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The reason why some pension annuities, called "Enhanced Annuities" or "Impaired Annuities", pay more than standard annuities is because those in better health tend to live longer than the average. The annuity providers therefore have to pay out more over the healthier person's retirement lifetime so their yearly income is usually lower. This is why it is extremely important to report any ailment, no matter how small you think it is, to your annuity adviser. It may get you a higher rate of return.
You may also receive a higher annuity rate if you smoke 10 or more manufactured cigarettes or use 85mg of rolling tobacco per day. (Visit Smokers Annuities.)
Even though you may regard yourself to be in relatively good health (some think they have to suffer from a serious medical condition such as cancer, heart disease or stroke to receive extra income in retirement), the reality is often different. A seemingly minor condition or complaint may substantially increase your annuity income.
In fact, if you have one of nearly 1500 health conditions, such as asthma, being overweight, high blood pressure, heart problems etc., you must ensure you mention it to your annuity adviser.
Additionally, higher annuity incomes are often achieved by:
• Those who have retired from certain occupations
• Those who live in certain parts of the country
It is estimated that up to 40% of the UK population could boost their annuity income with an "enhanced annuity", if you think you fit that category, it's essential that you tell your annuity specialist about it. You will stand a better chance of a higher annuity income for the rest of your retirement.
Back to Top of Page annuity providers factor in that you're likely to die sooner than the average non-smoker. They therefore assume that they'll not be paying you your annuity income for as long. A presumed shorter lifespan means that being a smoker can increase the amount of income you receive from your annuity.
As a smoker, you may already be entitled to receive a higher pension annuity income, but also, dependent on your age, you may receive further enhanced annuity rates of up to 30% above standard level annuity rates. For instance, if normally you would receive £1,000 per annum as a non-smoker, you might receive as much as £1,300 per year as an older smoker. (Visit Smokers Annuities.)
In the case of enhanced annuities it can actually pay to be older and in poor health!
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