When you buy an annuity you have a series of choices, sometimes confusing. Income must be paid monthly or annually in advance or late? What is the warranty? Do I need? What is the income does not need my spouse if I die before they do?
So how to find the best rate of return, all these decisions were made, knowing that when you buy the annuity, can never be changed.
It is fair to say that the options to add to their reduced retirement income will start. But what does each option and how much?
Costs v benefits
Climbing, a warranty period and pension of a spouse are the three most popular choices we see that added to an annuity.
We have done some research and found these interesting facts about the cost of each option:
• The warranty period is an option that costs less to add
• Including a pension to your spouse is cheaper and the next option would reduce your income starting approximately 10% per year
• The setting is the biggest cost is escalating
Our research shows that while cost is an important issue to decide how your pension, which is far from the whole story. For many people, retirement represents a significant proportion of their retirement income and it is essential to focus not only on cost but also the form of rent to ensure it is sustainable in the coming year.
So, what all these options and how much they cost? We have summarized our findings here, but if you want a specific answer to your situation, we propose the conversion and the IFA, or use the calculator pension income.
Payment frequency
Annuiteettimaksut can be made monthly, quarterly or annually and you must choose, you will receive payments in advance or at the beginning of time, or after, at the end of the season.
Take the income is paid monthly in advance to reduce the starting income of a little 'more than 3% of men 65 years and less than 3% of women the same age.
Warranty Period
In short, an annuity to pay the rest of your life or the rest of the life of your spouse if you survive, if you include a spouse's pension. However, a warranty period to ensure that income is paid for a minimum period of five or 10 years if you and your spouse (if a spouse's pension applicable) died in the early years of the annuity is in place.
A warranty period of five or 10 years can be added to an annuity. As most people statistically live longer than these periods the cost of adding such a benefit is low.
For 65 years, man and want income paid monthly in arrears from income is reduced by about 4%, if the five-year warranty period is selected, this will increase by 5.5% if the 10-year warranty is better. For women the percentages are 3.29% and 4.45% respectively.
The widow's pension
Widow's pension is to ensure that the annuity income will continue after the death of a spouse.
If the surviving spouse's pension is involved you must also decide what level of income will continue to your spouse after your death, the most commonly chosen levels are 50%, two thirds, or 100% of revenues.
For a man of 65 years, assuming his wife is 63 and the rent is paid monthly in advance by adding two-thirds of the spouses pension would reduce revenues from around 13%, 50% spouse's pension income would reduce the principle of just over 10%.
If a woman is 65 years, assuming the husband is three years older than the deduction would be approximately 10% spouses pension of two thirds, and 8% to 50% of the retirement year.
Intensification
In other words, the addition of escalating annuity means that will increase each year. If this option is selected, the annual increase could be a percentage or in line with an index, usually CPI (Consumer Price Index).
This is the most expensive, but it must be considered because it will help maintain the purchasing power of your income.
For a man of 65 years and adding the annual CPI increase to the pension is paid monthly in advance would reduce the income from about 39%, if an annual increase of 5% were selected, this figure rises to just over 45 %.
For a woman of 65, who also wants an income paid monthly in advance, reducing the level of output in case of RPI add a little more than 41% to almost 48% if the rate of indexation of 5% selected.
All small letters important
For the purposes of the figures in this article, we used income as the leading provider of an annuity that pays.
The annuity rates used were those applicable on 17 and 20 June 2011 and the source using the Exchange.
Annuity rates for the enhancement due to health problems or lifestyle.
Annuity income that an individual receives may be higher or lower than the figures of the table, and depends on the size of the pension fund, your personal situation, the annuity rates at the time of purchase, and, of course, the options chosen.
Phillip Bray writes investment firm sense of financial advisers, and regulated in the United Kingdom.
Phillip has over 15 years of experience in the financial aspects of writing and also advise clients of their financial affairs.
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