Annuity Advice Donegal

what are they and how do they work?

But for other pension arrangements, the purchase of an annuity may be one of the most important financial transactions in your life – certainly it is one with very long-term consequences. It is therefore important to understand how annuities work and the various options that may be available to you.

Many pension arrangements allow an “open market option”. This means that you may have a choice of going to any life assurance company regardless of where the pension fund itself was invested.
This is important as some providers of annuities are more expensive than others from time to time.
Always seek advice…

How does an Annuity work?

After you have taken your retirement tax free lump sum you may be able to choose between an Annuity and/or an Approved Retirement Fund. An annuity is designed to provide you with a regular and guaranteed income for the rest of your life. It is important to choose an annuity that reflects your needs and those of your spouse in retirement, so seeking financial advice before you make a decision is important.

Why choose an Annuity?

Annuities may be more suited to people who wish to avoid potential risks and would prefer a guaranteed income for their retirement. There are different advantages to taking out an Annuity and/or an Approved Retirement Fund (ARF). Our ‘Post Retirement Guide’ will help you understand the difference between these products. If you are unsure of the option that best suits you, call our Financial Planning Team on 074 9103938 and we will guide you through the process.

Types of Annuity

There are a number of choices you need to make when purchasing an annuity: A Single Life Annuity is payable for the rest of your life only. With a Joint Life Annuity, a percentage of your pension is payable to your spouse after you die. If you choose to include a Guaranteed Period, your pension will be payable for a minimum of the guaranteed period, even if you die during that time. A Level Annuity means payment of the Annuity remains the same throughout your life and an Escalating Annuity means payment of the Annuity increases at a fixed rate each year.

Help is at hand

No one starts out knowing exactly what they’ll need for their retirement years or what taxes and charges they will incur. With so many different plans and options available we all need some help making the decision that’s right for us. Thankfully, you’re not alone. From pension calculators to financial advisors, there’s plenty of help available. Use this ARF or Annuity tool from Zurich to see which option might be more suitable for you at retirement. There’s no right or wrong answer as to which option is better – just which one is better for you (based on the information you provide).

Tools to help you choose

Use the ARF or Annuity tool to see which option might be more suitable for you at retirement. There’s no right or wrong answer as to which option is better – just which one is better for you.
Use this Retirement Drawdown Calculator to look at the different options available in retirement. It compares the benefits of investing in an Approved Retirement Fund (ARF) with those of an Annuity.

Advantages of Annuities

• You get a secure, regular income for life, so you know exactly where you stand.
  You can choose an annuity type that best suits your needs, such as one that gives a part-pension to your dependants after you die
• Once you invest in an annuity, you will not need any more investment advice in relation to it
• You don’t need to worry about investment risk as your income is guaranteed
• You pay lower charges than with an Approved Retirement Fund (ARF)

Disadvantages of Annuities

• Once you take the pension, your income level is fixed or indexed* to an agreed amount per year and can’t be changed afterwards
• If you choose a level pension, or one that does not increase each year, inflation** will reduce its value during your retirement
• The annuity rate is fixed the day that you buy the annuity, so you won’t benefit from any later increase in annuity rates
• If you die early and your annuity income is just for your own lifetime, the money you used to buy the annuity does not go to your dependants – basically, your annuity dies with you

*Indexed or indexation, increases the benefit on your life insurance or investment policy automatically every year to make allowances for inflation. Your premium also increases each year to pay for indexation.
**Inflation, The risk that your money will lose value over time. Your buying power goes down as prices increase. You need to earn more than the inflation rate to get a real return on your money.

What some of our happy Annuity customers have to say…

The Pensions Authority regulates occupational pension schemes, trust RACs and Personal Retirement Savings Accounts (PRSAs).