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Choosing Annuities

When choosing an annuity there are many things to consider; The need for advice or not; the need to consider factors other than just the initial rate (spouse provision, death benefits and inflation proofing); the crossover point at which an annuitant will get back the full value of their pension fund. Age 82 has been quoted as the age at which full value will be returned and 90 to get good value.

 It is difficult to believe that annuity rates were somewhere around 16 per cent in 1990, with the comparable rate today being something around 5 per cent. Annuities have been around for a long time and for many years they were the only way of converting pension funds into an income stream.

Since 1998 average annuity rates have fallen by more than 65% but it is important to think of annuities are an insurance contract against long life, not an investment contract. With an insurance contract the expectation must be the payment of the sum assured and that is what annuities do.  .

If an annuitant thinks they will live longer than the average life expectancy, then they will receive more than their money back. If they die sooner, then some of this will be allocated to those who live longer.  The oft-quoted example is Henry Allingham, the First World War veteran who died age 113 after having an annuity for 48 years. 

With the growth in enhanced annuities, more and more people are being offered their own specific rate Enable’s IFA’s can help.

ssued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

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