Tips for choosing annuities

If you thought you only had one option for annuities, check out some of the annuity options.

11:07 30 December 2013

If you have not had a chance to investigate the annuity options available to you, you may believe that you only have a fixed-income option. This may seem a little inflexible, and may not seem to meet your needs, or retirement goals.

Here is a quick overview of some of the alternative annuity options, along with the more common one.

• The more common annuity is one, which provides a fixed income for the rest of your life, without any type of age cap.

 

• With-Profit annuities invest in a host of different options to minimise risk and maximise the return. You may, or may not, have the option to receive bonuses, which are dependent upon the performance of the investments. Companies typically hold back funds in good years so that they will still be able to pay the expected monthly income if there is a more difficult year.

 

• There are some annuities which are associated with higher risk levels, but may gain a much higher return. Unit-Linked annuities rise and fall depending upon the value of the investments in the fund.  These funds do not have any savings to ensure a certain level of income, so if you do not necessarily need the funds you could take the chance on receiving a higher rate of return over time.

 

• Most of the annuity options will provide a sort of minimum so that you know your income will not drop below a certain amount.

 

• There are also some additional choices you can make such as paying a little bit more, and allowing additional payments to be given to a spouse or to your heirs.

As with any significant financial decisions, it is important to make sure you have all the information you need to make decisions. Consult an experienced financial professional for suggestions for your finances.