Annuities
Pension Annuities
What is an Annuity?
It is a financial product which provides you with an income for life in return for a lump sum. The amount of income you receive for your lump sum will differ dependent upon age and sex.
It is normally people who have built up a pot of money in personal pensions or company money purchase arrangements who use these.
Types of Annuities
These range from value protected annuities through to impaired/enhanced annuities, investment-linked annuities, with-profits annuities, unit-linked annuities to purchased life annuities. You can also build in various options such as guaranteed periods, widows benefits, increases in payment and protection of the fund. All these options come with a cost and will reduce the level of the annuity at outset.
Selecting the right type of annuity at the outset is important as in the main once you have selected it you may not be able alter it should your personal circumstances change.
Alternatives
As mentioned above, once you have bought an annuity you can't change your mind and it is therefore inportant to look at alternatives.
These include Income Drawdown which allows you to draw income at a specific level while leaving the fund invested. Under current rules you have to buy an annuity before age 75 or opt for what is called Alternatively Secured Pension (ASP) to keep your money invested. There can be serious tax implications here so specialist advice is important.
Open Market Option (OMO)
Since September 2002, pension providers were obliged to remind you of your right to take the OMO. The Financial Services Authority (FSA) have produced factsheets and booklets advising anyone who is looking to take a money purchase pension to consider the OMO.
The OMO is a facility to enable us as Independent Financial Advisors (IFA's) to source the marketplace in order to find the best annuity for clients. Because of personal factors such as being a smoker, having impaired health and even the postcode where you live can have a bearing on the size of your annuity.
Your adviser will need to take all the above in account when sourcing for you as well as ensuring you would not be disadvantaged because of any guarantees you may have in your existing pension plan.
We can look at the options available to you to ensure you get the best annuity available. Don't accept what your existing provider offers without looking at OMO with us.