There are a number of different kinds of annuities and in order to get the most out of your choice of product it is important that you know what kinds of annuities are available and how they can benefit you. Firstly, there are annuities which are called Capital Protected Annuities and help provide annuitants with peace of mind. With this kind of annuity if you pass away before you reach 75, the fund that you have built up will be given back to your estate, excluding of course the income that has previously been utilised and a tax of 35%.
There are also impaired and enhanced annuities. A normal annuity is calculated to accommodate a life expectancy that does not reach beyond the average, so if you have an illness or condition that would decrease your life expectancy you can apply for an enhanced annuity or an impaired annuity. About a third of people reaching retirement have the potential to get an enhanced or impaired annuity. These annuities will give you extra income, so it is an excellent thing to apply for. Typically those who are smokers, overweight or have a history of cancer or heart disease are likely to get annuities of this kind.
Annuities which are called investment linked are annuities which are linked to the stock market. With this kind of annuity you can get the basic benefits of an annuity plus the potential of stock market development and what this could mean for your income. However, due to its link with the stock market there is no guarantee that an investment linked annuity will increase your income or improve it in any way.
With-profits annuities level out your investment over a period of time, this means that when you take out an annuity like this you choose an ABR or Anticipated Bonus Rate. If your anticipated bonus rate is lower than the insurance company’s then your income rises, but the opposite is also true.
There are a number of other kinds of annuities all offering a varying balance between your investment and your returns. With each option there is a risk and a reward and it will be up to you to decide which option best suits your lifestyle and the life you want to keep living. Annuities are a gamble, but a much less risky gamble than other investments that are available, and with all the options to choose from you can tailor your annuity to benefit you.