In
most ways, a With Profit Annuity is similar to a 'traditional'
annuity. The main difference is the initial pension
level, and future income levels, are dependent on the
performance of an underlying With Profits investment
fund.
Like a traditional annuity, it is simply a series of
payments made at selected intervals, in return for a
pension fund. (The level of payment is also dependent
upon age, sex, annuity rate, size of fund and options
selected.)
An assumed future bonus rate (ABR) is decided and selected
at outset, by the investor; and the higher the ABR the
greater the initial income. If your ABR does not mirror
the bonus rate of the With Profit Fund, the payments
may decrease. However, there is a guaranteed minimum
payment with most With Profit Annuities.
Tax Free Cash
Most types of pension plan have the option of first
taking a tax-free cash lump sum before exchanging the
residual fund for a series of payments. Once an annuity
has been purchased there is no further entitlement to
tax-free cash, therefore the decision of whether to
access the cash or not needs to be made prior to the
annuity selection.
Income
Annuity payments are taxed at source under
the PAYE system, and amounts may increase or decrease
in depending on fund performance relative to the ABR.
Death Benefits
The option of what type of death benefits
to include must be made at outset. The options available
are to provide for a Spouse or
Civil Partner / dependent's pension. The spouse's
pension can be for the full amount of the original pension
or for a specified percentage.
- You can fund a spouse or partners pension for up
to 100% of what you received.
- You can guarantee that for a period of ten years
after you die your estate still receives your remaining
payments.
- You can opt for the capital protection option which
means that if you die before the age of 75 your payments
minus the gross you already received can be paid out
but are taxed at a flat rate of 35%.
Advantages
- You will receive a guaranteed income for life,
and you can elect for your spouse to receive a guaranteed
income for their life upon your death.
- Tax-free cash is available at outset.
- There are no additional charges applied to the contract
once in force. All charges are taken at outset and
are reflected in the annuity rate offered.
- The contract is simple to understand, there is
no need to review the contract and there is minimal
paperwork needed to start the payment of benefits.
Considerations
Your income level cannot be guaranteed. It is also subject
to future investment returns.
Death benefits must be selected at the outset and cannot
be altered; these can also result in a lower initial
payment.
Suitability
If you want a guaranteed income but
with potential to benefit from future investment returns
then the With Profit annuity may be suited to you. They
suit people with a low to medium attitude to risk. With
Profit Annuities are also well suited to people who
have a relatively low pension and are heavily reliant
on these payments.
Get the Full Story
Robert Bruce Associates
can offer you specialist, helpful and clear advice on
these Annuities, to help you make an informed choice.
Our qualified advisors will ensure any decision is made
only once you have all the facts in hand, and only as
a result of establishing your personal wishes and criteria.
Why not call us today?
Get the most out of
your retirement.
Call us today
on: 0845 838 7377
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