What is an annuity?

An annuity is a type of insurance which enables the policyholder to enjoy a regular income in exchange for a lump sum of cash which is commonly built up through a pension scheme.

The amount that you are paid as part of your regular income is dependent on the insurer’s estimation of how long you will live, the annuity rates, and the amount of your pension fund.

 What are the advantages?

  • Provision of a regular income upon retirement
  • Choice of annuities available to suit your needs – Joint life annuities available
  • Income paid at intervals to meet your needs

The advantages and benefits will depend upon the type of annuity you select.

 What are the disadvantages?

  • Lower rates on annuities for women, due to increased expected life span
  • Falling annuity rates could reduce the amount that you receive from your pension
  • Not very flexible, and unless you have selected a flexible scheme, you could be tied to the policy

The disadvantages will also depend upon the type of annuity you select.

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