Tag Archives: Types of Annuities

Which Annuity Scheme is the Best?

When it comes to financial and investment products, there is no single answer to the question – which is the best product available? If there were a single product that worked well for everyone, other products simply would not exist. The fact that there are various kinds of annuities out there goes to show that which Annuity scheme will work best for you depends on your individual circumstances and what is most important to you.

The fact is that there are various annuities out there, each different from the other in some aspect or the other. The two main types of annuities are variable income annuities and fixed income annuities. As the title suggests, a fixed income annuity scheme pays a level, fixed income throughout the term of the annuity. A variable annuity, on the other hand, pays a variable income that is based on different factors depending on the type of the variable annuity.

If having a steady source of fixed income is important to you, a conventional level annuity scheme may work better for you than an annuity that is linked to an investment product such as stocks or shares. If you wish to protect your spending power and prevent your income from being eroded by future inflation levels, then an escalating or inflation linked annuity scheme might work well for you. On the other hand, if you require the maximum possible income from an annuity scheme right from the outset, then an escalating annuity scheme may not work well for you, since these type of annuities usually pay less than a conventional annuity would in the initial stages.

There are different bells and whistles that can be added to an annuity scheme, depending on the particular product and provider. For instance, you could add an extra feature that allows you to delay the annuity, or a feature that would allow your income payments to be made to your partner or beneficiaries for a certain period of time, even after you are gone.

So, when it comes to an annuity scheme, there is no single option that will work best for everyone. Everyone needs to find an annuity that will suit their specific needs. You can find the most suitable annuity by exploring the entire open market, and by comparing different products. If needed, you can also consult an independent financial advisor who can give you objective advice and help you make the right choice.

Before you Buy an Annuity do your research!

What is the definition of procurement? To procure something is to plan and research its purchase, examine the product in all its aspects and to find the appropriate product that meets all the demands and needs of the buyer. As such, to procure can simply mean to buy, but with a far more analytical approach. When you buy an annuity, you are making an important decision that will affect your income during the rest of your life. An annuity once purchased cannot be reversed, and so buying an annuity is a decision that should be treated with some seriousness.

We may not realise it, but whenever we do buy something we are, in fact, procuring it. First of all we analyse our requirements, we try to understand what we need and why, next we determine a budget, consider different options, think about long term prospects and lasting power of the different options and then finally, make the purchase.

Therefore, don’t simply buy an Annuity; rather, look at it as procurement. After all, an annuity is not like purchasing an electric kettle or a pair of pillow covers. It is something that plays a significant role in retirement income; will have a huge impact on your financial security during retirement; and therefore has implications for the quality of the rest of your life.

When it is time to buy an annuity, pensioners have the right to explore the open market and shop around for the best annuity. This is known as the open market option. Despite this, a large proportion of people do not exercise this right and simply commit to the first annuity deal that is offered to them by their pension provider. Many people do not offer the same time and effort when they buy an annuity that they would to buying something far more insignificant!

Research has shown that shopping around for the best annuity is one of the most important steps in ensuring that you maximise your pension savings during retirement. Indeed, recent figures show that using the open market option to look for the best annuity deal could mean getting up to 46% more income during retirement. Not only that – shopping around also makes you aware of the different types of annuities available on the market so that you can choose one that truly suits your individual needs. Procurement involves reading reviews, understanding different options, shopping around, negotiating with sellers and finally, making a commitment to buy the product that best suits your requirements. These very same principles must be applied when you buy an annuity.