Choosing the best annuity providers can be a difficult task, especially when you are confused about the type of annuity you should purchase. With so many different annuity providers and the myriad of annuity products available, it is important that a person considers the few important things that will help him choose the best annuity product. When purchasing an annuity, it is important to consider the following points.
How do I compare annuities?
There are a number of ways to make annuity comparison.
- The Financial Services Authority or the FSA offers an independent annuity comparison service which can allow you to compare the different rates and locate the best annuity providers. Common tools which are available through the FSA website include annuity calculator and annuity rates tables.
- Annuity rates can also be compared by seeking help from a professional annuities advisor. An independent advisor can look for the best options for you to choose from.
Annuity rates are usually shown on annuity rates tables as £s per £10,000 or as a percentage. For example, if the annuity rate is 5%, it would mean that you would receive £500 in income each year for every £10,000 you have in your pot. When making comparison between the different products, this is how you will see which one offers the best deal.
You must also remember that although the funds you have accumulated is tax free, taxes will apply to income you receive from your annuity.
Do you want your partner to receive an income from your annuity after your death?
If you want this option, then you should not opt for single life annuity because a single life annuity will only pay you throughout your life. Instead you should opt for joint life annuity which will pay regular income to your partner if you die first. Although the payment will be reduced, it will be beneficial especially if your partner is dependent on your income.
Do you want your annuity income to remain constant for the rest of your life?
These days, a lot of people are concerned about inflation. If you are someone who is also worried about how inflation will eat into the spending power of your funds, you must consider getting an index-linked annuity. An index-linked annuity rises in line with the RPI which is the Retail Price Index. There are a number of advantages and disadvantages of purchasing this type of annuity.
- When inflation goes up, your funds will keep pace with the inflation so that you are able to keep spending about the same amount that would have been each year.
- When the payout period starts, you will receive a lower amount and this will remain for a few years.
- You will not be getting an increase as quickly as you would want to because most of these types of annuities lag behind the retail price index announcements.
On the other hand, you can also opt for an annuity product that rises by a fixed percentage every year to counter the effects of inflation.
How do I compare annuities?
There are a number of ways to make annuity comparison.
- The Financial Services Authority or the FSA offers an independent annuity comparison service which can allow you to compare the different rates and locate the best annuity providers. Common tools which are available through the FSA website include annuity calculator and annuity rates tables.
- Annuity rates can also be compared by seeking help from a professional annuities advisor. An independent advisor can look for the best options for you to choose from.
Annuity rates are usually shown on annuity rates tables as £s per £10,000 or as a percentage. For example, if the annuity rate is 5%, it would mean that you would receive £500 in income each year for every £10,000 you have in your pot. When making comparison between the different products, this is how you will see which one offers the best deal.
You must also remember that although the funds you have accumulated is tax free, taxes will apply to income you receive from your annuity.
Do you want your partner to receive an income from your annuity after your death?
If you want this option, then you should not opt for single life annuity because a single life annuity will only pay you throughout your life. Instead you should opt for joint life annuity which will pay regular income to your partner if you die first. Although the payment will be reduced, it will be beneficial especially if your partner is dependent on your income.
Do you want your annuity income to remain constant for the rest of your life?
These days, a lot of people are concerned about inflation. If you are someone who is also worried about how inflation will eat into the spending power of your funds, you must consider getting an index-linked annuity. An index-linked annuity rises in line with the RPI which is the Retail Price Index. There are a number of advantages and disadvantages of purchasing this type of annuity.
- When inflation goes up, your funds will keep pace with the inflation so that you are able to keep spending about the same amount that would have been each year.
- When the payout period starts, you will receive a lower amount and this will remain for a few years.
- You will not be getting an increase as quickly as you would want to because most of these types of annuities lag behind the retail price index announcements.
On the other hand, you can also opt for an annuity product that rises by a fixed percentage every year to counter the effects of inflation.
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