What is a Lifetime Annuity?

A type of Secured Pension, a Lifetime Annuity pays out an income for the rest of your life on retirement. There are currently three types of Lifetime annuities available with different options.

The option of Lifetime annuity must be offered by a Scheme Pension provided by a Money purchase (Defined contribution) arrangement which is paid out by an insurance company selected by the scheme administrator.

 

What are the types of Lifetime Annuities?

The same rules of a Scheme pension applies to Lifetime annuities, therefore at the outset of taking income from any Lifetime annuity, the cash free tax component must be taken. The only exception to not taking tax free cash is when a Purchase Life Annuity is taken.

Thereafter, one of the following types of Lifetime annuity can be taken:

  • Fixed Rate
  • Index-linked
  • Investment linked

 

What are the Lifetime Annuity options?

The following Lifetime annuity options are available:

  • Enhanced Life
  • Impaired Life
  • Purchase Life
  • Guarantee Periods
  • Capital Protection

 

Why should I consider a Lifetime Annuity or a Scheme Pension?

The advantages of Lifetime annuities are said to be similar to Scheme pensions provided by both Defined benefit and Money purchase arrangements which are as follows:-

  • Guaranteed level of income for life
  • Guaranteed Survivor’s pension
  • No inheritance tax implications

Nevertheless the disadvantages of a Scheme pension provided by a Defined benefit scheme are that none of the above benefits can be changed or varied. Additionally the common disadvantages of all Scheme pensions is that once benefits are taken the member will not be able to profit from the underlying funds investment growth and lump sum death benefits are at best limited and at worst not available.

Restricted to members of Scheme pensions provided by Money purchase arrangements there will be reasons specific to an individual’s personal circumstances to which options to consider are more appropriate than others, and of course whether a lifetime annuity or a purchase life annuity should be taken instead.

These include issues relating to a members death benefit requirements, access to tax free cash and income in the short term balanced against the income requirements in the longer term that also need to be considered.

 

How can I take a Lifetime Annuity?

The first and most important step after you have decided you may want to start taking benefits from a Lifetime annuity that provides the desired retirement income is to have a discussion with us to provide you with independent financial advice.

We then agree what the most suitable type of Lifetime Annuity and options are for your particular circumstances at the acceptable level of risk you are prepared to take to match your needs as part of the pension planning process.

We then make an application on your behalf to commence pension benefits based on how much income required and the options and lump sum death benefits available from the annuity providing the retirement benefits including all other existing pension schemes or deferred schemes, and your personal tax situation.

 

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles associated with Pensions and Retirement from the Financial Services Authority website at http://www.moneymadeclear.fsa.gov.uk/products/pensions/pensions.html and http://www.moneymadeclear.fsa.gov.uk/print.aspx?Page=/products/retirement/types/lifetime_annuities

Also you can download the free booklet ‘Just the facts about pensions’ from the same website at

http://www.moneymadeclear.fsa.gov.uk/pdfs/pensions.pdf

Additionally you can download the booklet ‘Just the facts about retiring soon’ at http://www.moneymadeclear.fsa.gov.uk/pdfs/retiring_soon.pdf

and also the booklet ‘Just the facts about your retirement options’ at

http://www.moneymadeclear.fsa.gov.uk/pdfs/retirement_options.pdf