Tag Archives: Fixed Annuity

Is a Variable Annuity worth the hassle?

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There are two main types of annuity – fixed annuity and Variable Annuity. Within these two types, there are different products, and different bells and whistles that can be added to different annuities to make them work best for you. The fact is that there are several different options when it comes to annuities – so it is extremely important to explore the open market and make a thoroughly researched decision. After all, an annuity, whether it is fixed or variable, cannot be changed or cancelled once purchased.

So let us look at the two main types of annuity. A fixed annuity is where the income you receive remains fixed and level throughout the term of the annuity. A fixed annuity is also known as a level annuity because the income remains level. The term of the annuity depends on the type of annuity it is. A lifelong fixed annuity will pay a fixed regular and guaranteed income for as long as you live.

A fixed term annuity will pay a fixed, regular, and guaranteed income for a fixed period of time. This is a pre-agreed period, and the annuity can continue to pay your partner or beneficiaries for the fixed period even if you die within the term of the annuity.

A variable annuity is one where the annuity income is not fixed and can vary through the term of the annuity. For instance, an investment linked annuity is a variable annuity, where the annuity is linked to an external investment such as in stocks or shares. The income you receive from this annuity depends on the performance of the investment – so it could be much higher than a conventional annuity if the investment performs well over time; but similarly, it could also be lower than a conventional annuity.

There is also the risk that you may end up losing the amount you invested in the annuity in the first place. This is a risk that is inherent in this type of investments. Other types of variable annuity include escalating annuity or inflation linked annuity.

An escalating annuity is where income increases by a fixed percentage each year. Although you receive a higher amount in the later stages of the annuity, the income during the outset is generally lower than a conventional annuity, all other things being equal. The risk with this type of annuity is that you really benefit from the increase only at a later stage, and have to compromise during the early stages of the annuity.

A variable annuity could work for you depending on your individual circumstances and your priorities. On the other hand, if you prefer to have a guaranteed fixed income, rather than worry about inflation indices and external investments, then a conventional level annuity may suit you best. It is important to note that there are risks associated with a variable annuity that do not exist with a simple level annuity. If you are not sure about which annuity may suit you, always consult a professional advisor who can give you impartial and expert advice on the matter.

Save Thousands a Year by Using the Open Market Option!

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The open market option is the right of the consumer to shop around before choosing an annuity. An annuity cannot be changed or cancelled once it has been bought – so it is immensely important to choose correctly the first time around! After all, an annuity can have an impact on your financial security for the rest of your life, and is therefore one of the most significant financial investments in life.

Research shows that a huge proportion of people are not aware of the open market option and that many people still continue to commit to the first offer made to them by their existing pension provider. This is not to say that the offer made by your pension provider will not be competitive. But according to some research, shopping around could help you get up to 20% more income than your existing provider, depending on which annuity and provider you choose, and an impaired or enhanced annuity could mean getting up to 46% more! Using the Open Market Option and shopping around for the best annuity scheme can therefore help you to save thousands of pounds over the year and a vastly significant amount of money over time.

There are many different types of annuities and choosing the most suitable annuity can seem a bit daunting. This is probably why some people simply choose to stick with their existing pension provider for an annuity. But thanks to all the information, resources and tools available today, understanding the annuity market and making an informed choice is not difficult at all.

There are many comparison and advice websites out there which can offer objective information about different types of annuities. You can learn about fixed annuity options, variable annuity options, as well as different bells and whistles that you can choose to add to an annuity. You can also use online tools like the pension calculator, to work out the maximum income you can get for your pension savings lump sum. These free tools and resources can really help you make the best of the open market option. Most insurance companies and annuity providers also offer lots of information on their websites, as well as offering free instant quotes based on your individual case.

Shopping around and using the open market option has never been easier or more convenient than it is today, thanks to the wealth of resources and information available. If you need more help and guidance when choosing, you can also consult an independent financial advisor. In fact, for certain types of annuities, such as investment linked or escalating annuities, it is essential to take independent advice from an expert. An IFA can help you understand your own needs, different products and how they work, and ultimately make a considered decision.

Annuity Options

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When after years of working you reach the age when you begin to think about retiring and what this might mean for your financial future and your future in general, you will no doubt begin to think about retirement schemes, investments and the possibility of taking out an annuity. Annuity schemes are run by insurance companies and each insurance company will have a variety of annuity options that you will have to choose from, should you opt for taking out an annuity.

Before you can understand annuity options, you first have to understand how an annuity works. When you retire, and you decide to take out an annuity, you exchange the whole of your pension for the guarantee of a regular income. You can decide how regularly you want to receive your income; monthly, quarterly, bi-annually or annually. Clearly there can be many variations to an annuity and one of the annuity options that you will need to decide between will be between a fixed annuity and an index related annuity.

The first annuity option, the fixed annuity, will give you a fixed income each month. This amount will not change over time. Alternatively you can choose an index related annuity which is tied to the stock market and will fluctuate accordingly. Another annuity option to think about is an enhanced annuity. Many people do not even think about applying for an enhanced annuity but it can give that little bit extra to get you through the month.

An enhanced annuity, as an annuity option, is for people who smoke, are overweight, who are on prescription medication or have been recently hospitalised. You can also of course apply for an enhanced annuity if you have a chronic illness. With this option, because your life expectancy will be less, your annuity will be higher.

Not everyone will be granted an enhanced annuity, but it is well worthy applying. You will also have to decide whether you want to take an annuity as a single person, or with your spouse or partner. And within this option there are a few more to explore. With an annuity there are many choices, not only what annuity provider you choose to go with but also the various annuity options that are also available. This is so that you can get the most out of your savings, and so that you will have financial stability well into your retirement.