We are living for longer today than ever before. At the same time, the cost of living is ever rising. Changing social and economic factors mean that planning your finances during retirement has become more important than ever before. After all, retirement is known as the golden period, when one should be able to enjoy the fruits of life’s labour. It is therefore vital to plan carefully and optimise your financial assets to provide for you when you stop working. Things like annuity value prove to be immensely significant during retirement, as an annuity is one of the most important, and often the only source of income for pensioners.
An annuity provides a regular and steady income in exchange for a lump sum. People usually invest their pension savings into an annuity scheme, which then pays out an income either for as long as you live, or for a pre-agreed period of time. How much income an annuity can offer you, or Annuity Value, depends on the size of your annuity fund, which is the amount invested in the annuity, as well as various other factors.
The most important factors that determines annuity value is the type of annuity you choose to invest in and the current annuity rates. Other factors include age, gender, and location. Depending on your health and lifestyle, you could also be eligible for an enhanced annuity, which has a higher annuity value based on the shorter than average life expectancy of the applicant.
Often an annuity is the only source of income during retirement, and so choosing the right annuity with sufficient annuity value is extremely important. Once you buy an annuity it cannot be changed or cancelled – so it is important to make the correct decision the first time around. An annuity offers a chance to make the most of your life savings, but choosing an annuity that underperforms or does not suit your needs could mean losing your life savings to an ineffective investment.
It is imperative to shop around and use the open market option to find the most suitable annuity with a sufficient annuity value. You can consult an independent financial advisor with expertise in the retirement sector to understand the implications of investing in different types of annuities and choosing the best option. You can also use online tools like annuity calculators etc. to find out the best annuity value you could get in exchange for your annuity fund.
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.
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.
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.
If you are about to retire, or are at least at the stage when you are beginning to think about retiring, then you will quickly realise that you need to do everything in your power to make the most out of your pension. In most cases people have saved since their first job, and now that retirement is looming, there is a worry that what has been saved will not be enough. This is a common worry and for some, the answer to this quandary will be enhanced annuities.
With annuity rates at an all-time low, it is well worth investigating the possibility of effecting an enhanced annuity plan. This is a particular kind of annuity which offers a larger annuity for people with medical conditions that could limit their life span. As many as 70% of people are missing out on a higher annuity just because they don’t think about applying for enhanced annuities, and they work in the same way as a normal annuity.
Enhanced annuities and annuities in general might seem difficult to understand but really they are a bit of a gamble between you and the annuity provider, about how long you can live. When you decide to buy an annuity, enhanced annuities or otherwise, you use the lump sum of your pension in exchange for a regular and guaranteed income that you will receive for the rest of your life. The annuity is calculated on how long the annuity provider expects you to live, and this is why with an enhanced annuity you can receive a larger income.
So, how will you know if you are eligible for an enhanced annuity? If you are a smoker, or take regular prescription medication or have been hospitalised recently, then you should certainly apply for enhanced annuities. The sum you will receive will be determined by the current state of your health and how you live. Should you be overweight, have high cholesterol, or blood pressure then you can also receive about 7% more income than a healthy person.
There are a number of variables and it will be up to you to find out about them and then apply for enhanced annuities; if in fact, this is what you decide to do. Enhanced annuities can be extremely useful in getting you through the difficult patches, and so it is wise to take advantage of what is available as much as possible.
Choosing an annuity is one of the most significant and important decisions of one’s life, as once chosen an annuity cannot be cancelled or reversed. An annuity converts your pension savings into a regular guaranteed income for a fixed period of time, or for as long as you live. There are many different types of annuities, and several annuity providers. It is therefore important to shop around and use the open market option before making a commitment. An enhanced annuity plan is a type of annuity scheme, which can pay a considerably higher income to those who qualify.
Recent research shows that a high proportion of pensioners could be eligible for an enhanced annuity plan, but are simply not aware of this. Therefore, by signing on to an annuity plan that pays significantly lower income than they could receive with an impaired or enhanced annuity plan, many people lose out on thousands of pounds per year.
An annuity is one of the most important, and often the sole source of income during retirement. It is therefore vital to make sure that you are getting the best deal and optimising your pension savings through an annuity. There are simple ways to check if you could qualify for an Enhanced Annuity Plan, but first let’s understand what an enhanced annuity is.
An impaired or enhanced annuity plan is available to those who have a shorter than average life expectancy. Based on this, insurance companies can afford to pay more, since the expected term of the annuity is shorter than in a conventional case. Insurers use the applicant’s health condition and lifestyle habits to determine whether they are eligible for an impaired annuity.
Some common health conditions that qualify for an enhanced annuity plan are heart disease, diabetes, high blood pressure and obesity among others. Lifestyle habits include regular smoking. If you suffer from these or other health conditions or are a smoker, you may be eligible to receive a much higher income from your annuity than a conventional annuity.
An independent financial advisor can help you find out if you would qualify for an enhanced annuity. An IFA can also guide you through the pros and cons of each annuity type and help you make the right choice. You could also use a simple online tool available on many websites, to determine whether you qualify. Many annuity companies offer an enhanced annuity plan questionnaire or form to determine whether an applicant could potentially qualify for an enhanced annuity. The form generally consists of simple health and lifestyle related questions.