Knowing more about annuity programs

Annuities are an important program for those approaching retirement age.

07:21 05 November 2013

It is wise for you to start shopping for annuity as you approach your retirement age. Annuity provides regular income to you and even to your spouse in the event of your death. As you approach your retirement age, you may decide to take about 25% of your savings on pension (tax free). 

Annuity exists in two major forms. These are conventional lifetime annuity and enhanced annuity. 

If you sign up for a conventional lifetime annuity, you will be provided with a regular income right from the start of your retirement to the time of death. It is possible for you to still sign up for joint lifetime annuities which will see your reward go to your partner in the event of your death. 

Enhanced annuity is designed to compensate or pay those who are suffering from a particular condition or disease. In most cases, the money paid to those under enhanced annuity is usually higher than that of conventional annuity as a result of expensive medical checkups that may be undergone by them. In fact, people with these conditions are supposed to have a lesser life expectancy and so the annuity provider expects to pay off a high amount of money over a short period of time.

No matter the annuity you go for, its value is always dependent on your pension size and the rate at which the annuity is provided by the company. Annuity rates can be calculated using different factors such as age, life expectancy, gender, health, etc.

It is not compulsory that you purchase annuities from your existing pension company as there are other providers that will most likely give you better options; but if you feel that what the pension company offer is significant, then you are free to go with them. 

On a final note, if you are not too good at making financial decisions on your own, it is suggested that you find financial advisers or solicitors to advise you and point you in the right direction.