There are several types of annuity policies available. This gives you the opportunity to consider your present and future needs
when deciding whether or not to purchase an annuity when you decide to take benefits from your pension pot.
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Level income paid to you for the rest of your life
This is the more conventional annuity that pays a fixed sum at regular intervals throughout your life. The
amount of income is based on the annuity rate as quoted by the providing company at the policy outset. The policy assumes you have no
health or lifestyle issues that could shorten your life.
Upon your death the policy terminates worthless.
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Leave a level of income for your partner on your death
This is termed a joint life annuity. As with a conventional annuity it pays a fixed sum at regular
intervals throughout your life. The main difference with a joint life annuity is that should you die before your partner the
annuity policy will continue to provide a level of income to your partner. The level of income is agreed at the outset of the annuity
policy. These policies pay less than the level conventional annuity but could pay out more over the longer term.
Upon second death the policy terminates worthless.
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Pay an enhanced level of income due to your health and/or lifestyle
This is termed an enhanced annuity. As with a conventional annuity it pays a fixed sum at regular
intervals throughout your life. The main difference with an enhanced annuity is that it pays considerably more than a conventional
annuity. This is because the annuity provider considers other variables when calculating the
life expectancy of the policy holder, namely, health and/or lifestyle. If your medical history indicates poor health or your lifestyle
indicates a reduced life expectancy (such as smoking) you may qualify for an enhanced annuity.
It is always worth exploring this avenue as there are many conditions that qualify for an enhanced annuity.
Upon death the policy terminates worthless.
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You want to protect your income from the effects of inflation
This is termed an inflation linked annuity. Unlike a conventional annuity it pays a floating sum at regular
intervals throughout your life. This means the income will track inflation, so if inflation climbs so will your income to reflect
this. These policies normally start their income payments at considerably lower than that paid by a conventional annuity but over
a longer period of time could prove worth while.
Upon death the policy terminates worthless.
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You only want a guaranteed income for a known period of time
This is termed a fixed term annuity. A fixed term annuity pays a guaranteed amount of income for a
fixed term only, normally 5 to 10 years.
Depending on the terms of the annuity policy at the end of the term the policy could return a lump sum.
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You are not happy with the annuity rate you have been quoted and think
the annuity income would perform better if linked to an investment
This is termed an investment-linked annuity. The policy pays an initial income which may
go down or up in subsequent years due to the performance of the investments your policy is linked to. The majority
of these policies are linked to with profits funds
which provide protection towards the downside.
Upon death the policy terminates worthless.