Annuities

Mature Finance in partnership with Premier Retirement Services

Deciding to buy an Annuity is just one of your pension options in retirement. An annuityprovides you with a retirement income in the form of regular payments for the rest of yourlife. Choosing the right option is important, because you normally only have one chanceto get it right. Make the right decision and you can make a significant difference to yourincome and your longer term security.For example, do you stay with your current pension provider? Could you get a betterincome by switching to another provider using the Open Market Option? What is theimpact of delaying taking the benefits to a later date or taking tax-free cash and asmaller annuity income?You may not feel in a position to make these decisions right now. Don’t worry.By reading this guide, working through your options and using the range of tools provided,Premier Retirement Services can help you optimise your income in retirement.

1. Your pension fund(s) will be at least £5,000.
2. For Premier Retirement Services to help you find the right annuity, you may find it useful to do some research of your own. You may wish to consider your retirement needs and income aims. You will need to understand the details of your current pension(s). If you require help in understanding your pension details, Premier Retirement Services can help.
3. Premier Retirement Services will take your choices and help you to find a suitable annuity to match your retirement needs, from the annuity companies on our panel. Our panel is made up of some of the top annuity providers in the market.
4. Once you have decided on the right annuity for you, Premier Retirement Services will help you to complete the application form for your annuity. We will try to make this as easy as possible for you.

5. We will help you to complete the purchase of your annuity, transfer money from your current pension company to your new annuity provider and set up regular payments into your bank account. We want you to feel satisfied that you have used Premier Retirement Services and that you can enjoy a better income in your retirement.

   How do you make this important decision?

   When you speak to Premier Retirement Services, they will provide you with a personal illustration based on the features and benefits you select.

   Doing the Research

   First, you need to do some research.

   How much have you saved for your pension

   - your Pension Fund?

   How many different pension(s) do you have?

   What are the features and benefits included in the annuity quotation(s) from your current pension provider(s)?

   Planning your needs

   Secondly, you might like to plan.

   Take your time to read and complete some of the helpful tools in this section, specifically designed to help you plan and optimise your income in retirement.

   How much retirement income do you need?

   Do you want to receive some of your pension as a cash lump sum?

   Would you prefer to use the whole of your pension to provide an income?

   Do you want others to receive an income after your death?

   Jargon

   
   An alternatively secured pension allows your pension to remain invested yet you remain able to “draw” an income from it, however it does have several limitations attached to it as to how much you can draw. .

   An annuity is a financial product that is bought with a pension fund and provides an income guaranteed to be paid for the rest of your life. The amount of annuity you receive depends upon a number of factors including the size of your pension fund, age, gender, health, and the additional benefits that you choose to include in the annuity.

   Protected Rights relates to benefits built up from ‘contracting out’ of the State Earnings Related Pension Scheme (SERPS) and / or the State Second Pension (S2P).

   A conventional annuity provides an income guaranteed to be paid for the rest of your life. The income is not subject to investment risk, so no matter what happens to stock markets, house prices or any other investments, and even if you live to be the oldest person in the world, income from a conventional annuity will continue to be paid out. The security that a conventional annuity offers suits most people and so conventional annuities are the most popular retirement income product. .

   With this type of pension, the amount of retirement income you as an employee get is set in advance. The amount of income you get is based on the number of years you have worked for your employer and your salary.

   This is a form of unsecured pension which enables you to use some of your pension fund to purchase an annuity that provides an income for up to five years. The rest of your fund will remain invested. We do not offer this type of annuity and you cannot compare it on this site.

   If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   This is a term given to pensions which you contribute into, and can be either a personal pension or an occupational pension.

   While you are still working, the amounts you and your employer pay into your pension fund are set.

   The value of the pension fund at the time you plan to retire is not set and may carry investment risk.

   A dependant is someone who is financially dependent on you, typically a partner.

   Providers often require proof of this - such as a joint utility bill or mortgage/bank statement.

   Also called “Joint Life Annuity” – In the event of your death, your annuity income may continue to be paid to a surviving spouse, civil partner or dependant if you have selected a joint life annuity.

   If you choose for your annuity to be paid to a dependant, this person may be asked to prove that they are financially dependent on you.

   An Enhanced Annuity is an annuity that pays a higher income to you if your habits (such as smoking), medical history or lifestyle may shorten your life expectancy.

   Learn more about what qualifies for an Enhanced Annuity and the type of increase in income you might expect.

   This describes the way in which an annuity income can grow each year – You may choose to have no increase (level) or increase your annuity each year at a fixed rate (say 3% per year) or in line with the change in a measure of inflation, such as the Retail Prices Index (RPI) for example.

   Guarantee period

   An annuity income is payable for as long as you live.

   If you die soon after purchasing an annuity, you may feel that you won’t have had the best value. You can therefore choose a minimum guarantee period (typically 5 or 10 years), which means that, if you die within that guarantee period the annuity will continue to be paid for the remainder of that period.

   You can nominate anyone to receive the income from your guarantee either directly to the annuity provider or through your will.

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   An impaired life annuity is an annuity that pays an even higher income than an enhanced annuity for those who have significantly lower life expectancy due to an existing medical condition.

   Medical conditions such as heart attacks, heart surgery or angina, life threatening cancers, major organ diseases and other life threatening illnesses such as Parkinson’s disease and strokes may be considered.

   You can choose whether your annuity payments start as soon as your annuity has been set up (in advance) or at the end of your chosen payment frequency (in arrears)..

   The income payments from this type of annuity may fluctuate in value as they are linked to the performance of an investment fund(s) or unit linked fund. Income from an investment-linked annuity may have some guarantees attached to it so it’s worth checking what these are and how these work with the provider. If investment returns are good, your annuity income payments may rise.

   If investment returns are poor, then your annuity income payments may fall, so they are not without risk. Two types of investment linked annuity you may have heard of are the with-profits annuity and unit-linked annuity.

   If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   In the event of your death, your annuity income may continue to be paid to a surviving spouse, civil partner or dependant if you have selected a joint life annuity. If you choose for your annuity to be paid to a dependant, this person may be asked to prove that they are financially dependent on you.

   This is a measure of retail price inflation (RPI), with some limits. The measure has a cap in the growth of inflation of 5% each year and also a floor of 0%, which the measure will not fall under. So linking to this means your annuity should increase in line with the costs of living – providing that increase is no more than 5%. Conversely if inflation is negative your income simply remains the same.

   This is the date your pension scheme(s) expects you to retire. For occupational schemes this is set by the scheme’s rules. For personal pensions this would have been set at the start of the policy. If you want to retire at a different date, contact your pension provider.

   This is a pension provided by your current or previous employer(s). It can be either a defined benefit pension or a defined contribution pension – contact your employer(s) for more information.

   The ability for you to shop around and buy an annuity from any annuity provider, not just the company that provides your pension. This option enables you to search for the best annuity rate for you.

   You can choose to have your annuity income paid monthly, quarterly, half-yearly or yearly.
   The frequency of payments that you choose will depend upon your personal circumstances.

   Part of your Pension Fund (usually 25%) can normally be taken as a lump sum and is currently tax-free. This is now known as a Pension Commencement Lump Sum, but may also be referred to as a tax-free lump sum or tax-free cash. The Pension Commencement Lump Sum is yours to do with as you see fit.

   This is the value of the pension plan that you have built up over the years from your pension contributions, those of your employer, tax relief that has been added to contributions and any national insurance contribution rebates. At retirement your Pension Fund can be converted into retirement benefits such as an annuity and tax-free cash.

   This is a type of annuity bought with savings, rather than your pension. It provides you with an income in a similar way to a pension annuity. They are sometimes purchased with money gained from an inheritance or using the tax free cash obtained from taking out a pension annuity.

   This comparison site does not offer these types of annuity. If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   This is a commonly used measure of inflation. You can link an annuity to this measure so each year your annuity is adjusted to ensure it is kept in line with inflation.

   Part of your Pension Fund (usually 25%) can normally be taken as a lump sum and is currently tax-free. This is now known as a Pension Commencement Lump Sum, but may also be referred to as a tax-free lump sum or tax-free cash. The Pension Commencement Lump Sum is yours to do with as you see fit (also known as a Pension Commencement Lump Sum).

   You may be able to take your entire pension as a lump sum, rather then buy an annuity. This applies as long as you are aged 60-75 years and the value of all your pension funds fall within the trivial commutation limit (£17,500 in tax year 2009/10 and £18,000 in tax year 2010/11, from 6th April 2010). Trivial commutation payments from all your plans must be taken within a twelve month period. 25% of each payment is tax free and the rest subject to income tax.

   A Unit linked annuity is a type of investment linked annuity that links your annuity income to the performance of units within a provider’s fund. Instead of providing a known, guaranteed lifetime income your annuity income can vary with the performance of the fund. The future growth of your annuity income cannot be guaranteed and may go up or down. .

   This comparison site does not offer this type of annuity. If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   Unsecured pension (also known as “Income Drawdown” or “Pension Drawdown”)

   Instead of purchasing an annuity you may keep your pension fund invested and draw income from that invested fund.

   This is not without risk and usually only suitable for those people who have a large pension fund, other sources of retirement income and/or are willing to see their income payments rise and fall – click here to learn more about this type of product.

   This comparison site does not offer these types of annuity. If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   These are products that combine an element of guarantee (as found in an annuity) and an element of investment (as found in an unsecured pension).
   

   This comparison site does not offer these types of annuity. If you already use an independent financial adviser then we suggest you speak to them about this type of product, but if you don’t currently have a financial adviser then we could help you find one.

   If you die before your 75th birthday this product would pay the nominated beneficiary the balance of the value of your pension fund(s) (or a selected percentage) at outset of the annuity, minus the income you have received from the annuity up to the date of death, and be subject to tax charges.
   For example if your pension fund is £ 40,000 and you die after only receiving £20,000 worth of annuity payments, the difference of £ 20,000, would be paid to your nominated beneficiary, minus tax.

   A With-profits annuity links your annuity income to the performance of your annuity provider’s with-profits fund. Instead of providing a known, guaranteed lifetime income your annuity income is linked to the annual bonus rate declared by your annuity provider for the with-profits fund.
   In a with-profits annuity, the future growth of your annuity income cannot be guaranteed and may go up or down.

   This comparison site does not offer these types of annuity. If you already use an independent financial adviser then we suggest you speak to them about this type of product.

   Overlap is only relevant if you choose both a joint option and a guarantee period option with your pension annuity.

   • If you die within the guarantee period, with overlap means that your surviving spouse’s, civil partner’s or dependant’s annuity income payments will start immediately and will be paid in addition to the annuity income payment due in the remaining guarantee period.
   • Without overlap means that your surviving spouse’s, civil partner’s or dependant’s annuity income payments will not start until after the guarantee period.

   Proportion is only relevant if you choose to receive your annuity income payments in arrears.

   • If you choose with proportion, a final proportionate payment will be made to your estate to cover the period between your last payment and the date of your death.
   • If you choose without proportion, your final annuity income payment will be the last normal payment before you die.