Annuities

For the payment of a lump sum it is possible to arrange an income that will be paid for a fixed term or until death. Annuities are most commonly purchased with pension fund money when an individual elects to retire.

An annuity can be set up with a range of features that suit the individual. Standard features are as follows:

• Guaranteed payment period, typically 5 to 10 years
• Payment periods, usually monthly, but also quarterly or yearly
• Level income or with an annual indexation of benefit as a hedge against inflation
• Annuities are taxable as income at the individual's highest marginal rate.

The benefits that are purchased will depend upon a range of criteria shown below:

• Age
• Gender
• Health
• Interest rates at date of purchase
• Singe or joint benefit
• Level or indexation in payment

There are in addition to the standard annuity alternative schemes that are investment linked based upon With Profit or investment fund performance. These annuities carry with them a potential for increasing/decreasing income depending upon investment returns.

For individuals who have suffered one or more medical conditions it may be possible to secure an enhanced income depending upon the severity and range of conditions. In addition, some providers offer increased rates for sickness.

For individuals with large pension funds it is possible to use some of the money to purchase an annuity from all or part of the fund. When only part of the fund is used to purchase an annuity the balance can provide additional income at some future date.

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