rate,rates,foreign exchange,savings,borrowing,tax,tourist rates foreign exhange rates, tourist exchange rates savings rates, isa rates,deposit rates,cheque account rates borrowing rates, mortgage rates, loan rates tax rates, tax allowances
Personal finance home | glossary | guides | links | contact
money rates,interest rates,exhange rates,currency rates rates,rate,interest rates,best rates,comparisons of rates
Rate home page
SEARCH THE WEB

 


ANNUITY GUIDE

An annuity provides a guaranteed income for life in return for a lump sum invested.

There are two types of annuities; Compulsory purchase and Purchased life.

Compulsory purchase annuities are bought with a payment from an employer's pension scheme or personal pension fund. Part of the fund may be paid out as tax-free cash, the remainder must be used to buy an annuity.

The income payments (usually monthly) from this type of annuity are taxed as earned income and are usually paid to the recipient net of basic rate tax. Higher rate taxpayers may be liable for additional tax which at present has to be collected separately.

Purchased life annuities are purchased by private investors and payments comprise part taxed interest and part untaxed return of capital.

There are different types of annuity arrangements that are briefly listed below:

Level without guarantee

The income payments provided are the same each year throughout the recipient’s life.

Level guaranteed 5 years

The income payments are the same each year but are guaranteed to be paid for a minimum of (5) years even if the recipient dies within (5) years. The balance due will be paid to the estate of the recipient.

Escalating 5% p.a. without guarantee

The income payments increase each year by (5%) compound but cease immediately on death.

Joint life last survivor

On the death of the first life the income passes to the second life or survivor and ceases on the death of the latter.

With overlap

If one of the recipients dies within the guaranteed period, the balance of the guaranteed income is paid as a lump sum (sometimes discounted) to the second life who will receive the income from the annuity in his or her own right.

Deferred Annuity

These annuities are purchased with a lump sum or series of payments to commence at a future date for a specified term.

Equity Linked Annuity

The underlying value of the annuity is unitised enabling the annuitant to withdraw some units each payment period with the balance remaining in the fund going up and down as the fund value varies with market movements.

Enhanced Pension Annuities

Some insurers are prepared to pay a higher income than usual, for various categories of people, because they assume the payment period will be shorter than average. Smokers, people with certain health problems and from selected occupations should consider enhanced pension annuities.


Exchange Rates | Saving | Borrowing | Tax | Email this page to a friend

© 1999-2013