All people in the UK who has a pension fund greater than £18,000 needs to purchase an annuity with the fund when they decide to retire between 55- 75 years of age and there is some important info that you should be aware of before you buy an annuity.
When purchasing your life annuity there are some important points to consider which include how much of a tax free lump sum do you involve from the pension fund before you purchase your annuity and this could be up to 25% of the fund value which we would always recommend you take as this is the only part of the annuity that becomes tax free. What you decide to do with this tax free part of the pension fund is entirely up to the individual but we commend that you take it as it is free of tax.
There are many factors that will affect the amount of income you get from your annuity in retirement and we would encourage you to give all personal details to the company so they can determine what is the correct amount of annuity you should receive on a monthly basis based on your individual destiny.
Things that will affect your annuity are your health, age you decide to retire at and do you wish to include a better half’s pension when applying for a life annuity.
If you have suffered any health issues in the past or currently have health issues when you apply for your annuity do not be discomfited to separate them as this could lead to you gaining a substantial increase on your monthly annuity payments over the term of the policy .
Annuities are based on life expectancy so if you have any medical conditions then disclose them as you could find your monthly annuity payments increasing by one third if your medical condition qualifies for enhanced annuity rates.
More and more companies in the UK are getting tortuous in the enhanced annuity marketplace but the two major companies at present are Just Retirement and Partnership which generally offer the best rates for enhanced annuities in the UK today.
The other main factors that will resolve how much your annuity will pay each month is do you require the annuity to include a spouse’s pension. This will also be based on your spouse’s age, medical history and how much of a pension you want them to receive when you pass away. You can generally select 33%, 50% or 75% of your monthly annuity to pass to your spouse but the higher the amount you select will generally diminish the amount you receive so interrupt all the alternatives first or get a Financial Advisor to work out all the dissimilar replacements before you purchase your annuity.
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