Pension Annuity

 

 

Pension is an important source of financial security for individual because it offers a steady income after retirement. To convert the value of a pension fund into a regular income is possible through the purchase of a financial instrument, known as Pension Annuity.[br]

 

Using pension annuities, you can always choose to receive the pension income on a monthly, quarterly or yearly basis. You can also choose an income that stays at the same level or increases each year either by a fixed percentage or in line with inflation. The decision to buy a pension annuity is irrevocable. Since pension annuities are long term, one-off commitments, this must be chosen with a lot of care. The final choice should be to select the right annuity plan that:

• eases the transaction process
• maximizes the possibilities with long term benefits

 

Pension Annuity: Types

There are different types of pension annuities available such as:

·        Standard Annuity: This plan provides an individual with a fixed income for the remaining part of life. The amount is known beforehand.

·        Profits Annuity: It is the income, which is a part of an individual’s initial invested sum, which again gets invested in equities and bonds. This annuity is risk inherent.

·        Unit Linked Annuity: This annuity depends on various risks and investments. It is also dependent on the market fluctuations.

·        Immediate Annuity: This type of annuity is cash related to an individual’s pension fund and is tax free. This is a cash annuity in nature.

·        Impaired Life Annuity: This is an annuity for those whose life expectancy is lesser than counterparts of the same age. There are variations of this annuity as it is related to the different lifestyle habits of the annuity holders.[br]

Pension Annuity Benefits

The benefits of pension annuities are:

 

·        Guaranteed income: It guarantees a regular income for life. Another enticing fact is that it has low risk option.

·        Income Choice: The pension can be given at regular intervals both in advance or in arrears.

·        Low charges: The purchase of the annuity is a one time investment and there are no additional payments on receiving the pension.

 

Irrespective of what types of pension annuities you opt for, it is essential to consider its overall financial complications before buying it.