Thursday 17 May 2012

A lifetime Annuity as a source of income

By Nicole Helms


One of the most popular financial plans that a person might choose to take out upon retirement is a lifetime annuity and this is one way that a person can take their existing pension pot and turn it into a reliable source of income - similar to a wage. Proving to be a popular option, due to the way that they do work in a very similar manner to a wage, lifetime annuities are becoming more common right around the UK as a way of providing sustainable support for the remainder of a person's life.

At retirement, one of the biggest concerns that a person can have is wondering how they will possibly replace their existing income with what they have saved from their pension pot and this can be easily solved by taking out a lifetime annuity. A lifetime annuity can provide you with a reliable source of income for the remainder of your life, while allowing you to take up to 25% of your pension pot as a tax free lump sum.

The amount of annuity income that you will receive is very dependent on your personal circumstances and annuity calculations are not always that easy to make. Your calculation is primarily based on life expectancy so you need to take into consideration anything in your life which might alter that, this could include the type of lifestyle you lead, where you live and any type of health problems you have.

If you are believed to have a higher life expectancy then in general your annuity income will be lower as it will be paid over a longer period of time. Other factors that can influence your life expectancy include if you smoke or drink, your age and where you live.

There are many annuity decisions open to you and they don't have to be individual decisions, if you have a partner then you may consider taking out a joint annuity which can cover you both in the event of any unexpected deaths.




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