Wednesday, May 11, 2016

Hot Topic #11: Annuities - update 11th May

If you are at the stage in your life when you are thinking about retirement, or reducing your hours at work, you might want to consider how you can get more money from your pension. 

Why an annuity?
When you reach that stage in life when you want to start drawing on the money you’ve saved in your pension fund, a typical way to do this is to buy an annuity with money from your pension fund. An annuity provides you with a regular income for life, no matter how long you live.
When you are buying your annuity, you will normally be entitled to take a part of your pension fund as a tax-free cash lump sum. The remainder of your fund can then be used to buy an annuity. Alternatively, you can use your entire pension fund to buy your annuity.
There are a number of factors that will determine the amount of the annuity you are entitled to receive such as 
age {50 to 80}, 
have a qualifying medical condition, 
are taking regular medication, 
are overweight, 
and / or are a smoker. 
This income may be higher than the income you could receive from a standard annuity.

Choosing the right option to provide an income for the rest of their life is a big decision. You don’t have to buy your annuity from the same company your pension is with so you are free to shop around and find the best policy and provider for You.

Shop around for the best deal.
 If you were buying a new house or car, it’s more than likely you would have a good look around the market to find what suits you and offers the best deal. You should do exactly the same when you start thinking about your income in retirement. This money is going to see you through the rest of your life, so it’s a big decision. It’s important to shop around because different companies will offer different rates for retirement income. The money from your pension fund has to stretch over a long time. Because of that, even the smallest difference in annuity rates can affect your pension income by hundreds of euros a year for the rest of your life. Compare quotes from different companies 
Your pension provider will offer you a rate for your pension income, through an annuity. Remember that you don’t have to take the first deal you’re offered. Your pension plan will likely include an open market option, which means you can shop around, looking at deals from other companies. Take some time with your Financial Adviser to get quotes from a number of companies and compare them against each other.

How much income will you receive? 
This question can only be answered when the Company have received certain information that they will use to calculate how much pension income you will receive. As the level of pension income you may get depends on your personal circumstances, it can vary from one person to the next.
They will look at all sorts of things to work out your pension income, including:
› The size of your pension fund 
› The annuity rates at that time
› Your age 
› Your health (if you’re applying for an enhanced annuity) 
› Whether you want to add your spouse/civil partner
› Your spouse/civil partner’s age

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