Annuity Death Benefits
Annuity Death Benefits
Having saved towards your pension all your working life, it is understandable that you want the best annuity plan for your retirement. If you are healthy and about to retire, you may enjoy the rest of your life without financial anxiety, for you will receive a steady income from your insurance provider for the remainder of your years.
"but if you observe, people always live for ever when there is an annuity to be paid them; and she is very stout and healthy, and hardly forty. An annuity is a very serious business" - Jane Austen Sense & Sensibility
The downside with a conventional annuity however is that we don't all live forever and if you buy an annuity and you are unlucky enough to drop down dead the next day, there will be no return of capital to your estate. One way of mitigating this is to build in a income guarantee which means that the annuity provider will continue to make payments to your estate for a set period e.g. 5 years. The maximum guarantee period is 10 years. If you have a partner another way of mitigating risk to capital is to have the annuity written on a joint life basis with income remaining level on first death - the insurer will of course price this into the cost of providing an income so will get a reduced annuity.
A lifetime annuity may provide a policyholder with capital protection. With this type of annuity the contract guarantees that if the policyholder dies before their 75th birthday and they have not received a certain total amount of annuity payments by that time, the balance will be paid as a lump sum on the policyholder's death.
This lump sum is called an annuity protection lump sum death benefit and is currently subject to tax at 35%.
Whether or not a contract provides this protection will be decided on purchase, and be expressly provided for in the contract. This protection will be costed into the annuity price so there is a price to pay for this peace of mind.
To get a true perspective on what you could get from an annuity based on current rates and the pros and cons taking into account your personal circumstances please use our service below:
Important Risk Information:
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.