Tag Archives: Annuity Purchase

Why Choose a Fixed Term Annuity?

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Throughout your working life you save hard to provide for your income needs in retirement, so as the day approaches you have many choices to consider.  Will you chose to annuitise or go for the income drawdown route?  Even if you choose to go for an annuity you need to consider all the variations that are available.

A standard compulsory purchase annuity (or Lifetime Annuity) is purchased after any tax free cash has been taken and is then offering a guaranteed income for life.  The terms offered at the start may be based on you being fit and well when you first enter retirement and would therefore be based on your normal life expectancy.  The danger is that you could be annuitising too soon.

An alternative that should be considered is the Fixed Term Annuity which as the title suggests is a temporary measure for providing an annuity income. These schemes provide you with the guaranteed level of income you may require but for a specified period of time.  In addition to the guaranteed income they will also guarantee a maturity value which is known as the Guaranteed Maturity Value (GMA).  At the maturity date you are then free to take out another Fixed Term Annuity or consider moving into Income Drawdown, Conventional Lifetime Annuity or Investment Linked Annuity.

Choosing a Fixed Term Annuity will give you added flexibility as you are making a decision for your income for a specified term rather than one that will last your lifetime.  You can also choose this type of plan to access your Pension Commencement Lump Sum (tax free cash) and take no income for the duration of the fixed term.  You will then receive a guaranteed return at maturity.

By deferring your annuity purchase you may find that later in life you health has deteriorated and you could at that point secure benefits under an enhanced annuity therefore giving you the potential for your income in retirement.

You can include various options within the Fixed Term Annuity Plan to offer your loved ones some protection.  You can set up the payments so that they continue to pay to a spouse, civil partner or financially dependent partner should you die during the fixed term.  You could also structure these plans to ensure that the income will be paid for a specific number of years from inception even if you should die during this term this is known as a guarantee period.

In a similar way to Income Drawdown Fixed Term Annuities must be reviewed every three years for those aged under 75 and annually for those aged over 75.  Even if the term of the plan is over three years a review of the maximum income level is still required.  Income levels may need to be reduced should the government lower the GAD rate.

Is an Independent Financial Adviser Necessary for an Impaired Annuity?

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Many consumers choose to do a great deal of independent research on potential investment strategies once it is time for them to start thinking about their retirement years. All consumers should be doing this kind of research on their own. However, many consumers forget to seek out the independent annuity advice of more seasoned experts in the field. While every consumer should do their own research, that research should be partnered with the expertise and independent annuity advice of an independent financial adviser. There are several reasons for this.

Benefits of Using an Independent Financial Adviser

There are several unique benefits to seeking out the advice of an independent financial adviser. First, and most obviously, an independent financial adviser (IFA) simply knows more about impaired annuities and all annuities in general, than the average consumer. They truly have the independent annuity advice that consumers need in order to invest smartly.

Secondly, independent financial advisers have access to the entire annuity market. This means that they are able to use their knowledge, partnered with what is available in the current market, to better give their consumers educated and independent annuity advice. This means that they are able to get some pieces of information that wouldn’t even be easily accessible by the average consumer. They are able to use that information to better advice consumers who are looking to purchase annuities.

The third benefit of receiving independent annuity advice from an expert in the field is that the expert is most likely going to be able to find better rates than the average consumer. This is almost guaranteed if the consumer is simply going direct and not using the open market option to find the best deals and rates for their annuity purchase. Using the independent annuity advice of an expert can help the consumer to find the best rates and deals available in the current market.

Lastly, and most importantly and simply, by seeking out an independent financial adviser, the consumer can rest assured that the independent annuity advice they are receiving is worthwhile. They can be more secure and stable in their decision making and can be comfortable knowing that they received the best advice they could in order to make their decision. Receiving independent annuity advice can make a consumer far more comfortable determining what annuity they will purchase, if any.