Lifetime Annuity – what does it do?
Essentially a lump sum is used to buy a regular income for the rest of your life. The lump sum could be a pension fund or it could be from a bank account or the proceeds of an investment or asset e.g. sale of a property.
When using a pension fund the income will be taxed according to your personal circumstances – this is probably the most common situation. Providing additional income to pay for long term care at home or in a care home might be another application of this service – often referred to as a long term care plan, the taxation of this depends on other factors.
The lifetime annuity is a contract between you and the insurance company you select – the conditions on which that agreement is made cannot be changed – so it is imperative that you make the right decision.
The amount of income you can buy is determined by a number of variables:
- The amount available to buy the annuity
- The age of the annuitant (person on whom the benefits are based)
- The number and type of options requested
- The health and lifestyle of the annuitant
Age: Generally speaking, the older you are – the more income you get. The insurance company tries to estimate how long they will be providing income.
Options: Choosing a benefit that will continue to a surviving spouse/partner is likely to cost more than a plan that ends with the annuitant. An income that increases each year will cost more than a level benefit. Guarantees can be included – for example a guarantee that payments will continue for a minimum period of time. Income payments can be made annually, half yearly, quarterly or monthly in most cases.
Health and Lifestyle: An enhanced annuity is normally available for regular smokers, but can also benefit people who are overweight. An enhanced annuity may also be available if you have spent a good proportion of your working life in a hazardous occupation, such as mining. If you are on any medication at all – it is worth investigating because you might get a higher income for the rest of your life.
Only a fully qualified Independent Financial Adviser (IFA) working across the whole market is in a position to provide all these options. The full range of Care Home Fee (Immediate Needs Annuity) requires additional qualifications. I have all these qualifications, so if you need help with the selection and administration of such a plan – please contact me for a free initial consultation.
Send me a message or request a meeting on eamonn.dorling@ntlworld.com or mobile: 07767 795816