Tag Archives: Investment Linked Annuities

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.

Create Your Own Bespoke Annuity

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An annuity is a way to turn pension savings into regular usable income for the rest of your life, or for a pre agreed period of time. Usually, an annuity is bought with a lump sum from the pension pot, and the size of the lump sum will determine how much income you could get back from the annuity. But annuity income also depends on a number of other factors including age, gender, location, health, the kind of annuity you choose, and of course current annuity rates.

Your pension provider is obligated to make an annuity offer to you; however, you have the right to explore the open market before making a choice. This is known as the open market option and your pension provider is required to make you aware of this path. Shopping around for an Annuity can help you understand the various types of annuities that are available from a multitude of annuity providers.

For instance, there are fixed annuities that pay a fixed income for the entire term of the annuity, and variable annuities such as escalating or investment linked annuities where the income you receive from the annuity varies over time due to several external factors. While a fixed, stable, guaranteed income may work for some people, others may like to have income that is linked to inflation or income that is linked to an external investment product.

An annuity once purchased cannot be changed or cancelled so it is vital to shop around and find an annuity that is the best match for your individual circumstances and needs. It is also important to be aware that many annuities have additional bells and whistles that can be added to the product. For instance, some annuities have the option of adding features whereby your income will continue to be paid to your partner or beneficiaries for a certain fixed period even after you are gone.

You could protect your income from being eroded by inflation by adding an escalating feature, where the annuity payments increase by a certain percentage each year or by investing in an inflation linked annuity, where the payments depend on the Retail Price Index. Naturally, adding extra bells and whistles such as these will generally impact payments in the initial stage – so that, for example, an escalating annuity will pay less than a conventional level annuity at the start of the annuity.

It is important to understand the details of how the annuity works before investing. The key to getting the perfect annuity is to use different tools and options to make the annuity work for you, and to strike the right balance between the level of income you need immediately, and the level of income you would ideally like to receive in the future.

Different Types of Annuities

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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.

Which Retirement Annuity is Right for You?

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Consumers have a variety of options available to them as they approach their retirement years. Not only do consumers have to choose between different investment strategies, but within those strategies lie another series of options available to the consumer. This is especially true when it comes to retirement annuities, a very popular option for many consumers. Retirement annuities offer several unique benefits to the consumer. However, there are several different annuities from which to choose, which can present a challenge to the consumer as they choose between their options. Each retirement annuity offers unique advantages to the consumer and with so many options there is one available for every unique consumer situation

Conventional Annuities

Conventional annuities work best for those consumers who are most focused on stability. This retirement annuity guarantees a level of income for the rest of the consumer’s life, regardless of any performance in the financial markets.

Variable Annuities

Variable annuities are a form of the retirement annuity that works best for those consumers interested in taking a risk. These income payments are typically lower than a conventional annuity but can pay out higher return as they are linked to investments in the financial markets.

Investment-linked Annuities

This retirement annuity is linked to specific underlying investments and can offer large payments to the consumer. Similar to variable annuities, this type of retirement annuity is a best fit for those consumers who are willing to take a risk with their retirement and pension savings.

Enhanced Annuities

Enhanced Annuities are a very unique kind of retirement annuity. This annuity is perfect for those consumers who are looking to take advantage of a higher annuity payment, based on their health or lifestyle status. This retirement annuity does require a specific eligibility requirement but can be worthwhile the assessment process for those who qualify, as payments are  usually increased since the insurer assumes that given the health condition, the consumer will have a shortened lifespan.

Fixed Term Annuities

Consumers who are looking for some more flexibility with their investment will benefit from a fixed term annuity. This retirement annuity offers a set income amount over the course of a predetermined period of time. This retirement annuity allows the consumer to budget for the period of time in which they are receiving payments, without having to worry about any impact from the financial markets, as the income is guaranteed for the predetermined time period.