Protect against the risk of outliving your savings with a steady income
Planning for retirement can feel overwhelming, especially when trying to ensure your money lasts as long as you do. Annuities have long been a reliable option, offering guaranteed income during your golden years.
An annuity is an insurance product that converts a portion of your pension savings into a regular income, ensuring financial stability during retirement. Unlike pensions that rely on fluctuating market performance, annuities provide consistent payments. This quality alone makes them an attractive option for retirees looking for reassurance.
Appeal of a guaranteed income
One of the key advantages of annuities is the stability they provide. Retirees are safeguarded against the risk of outliving their savings, a major concern for many. By securing income through an annuity, you guarantee a steady stream of funds to cover essential expenses or preserve the lifestyle you have planned.
Equally important, annuities eliminate the concern of market downturns. Unlike other investments, which can fluctuate unpredictably, annuities adhere to fixed payment schedules. This consistency can offer a reassuring anchor in an uncertain financial environment.
Enhanced annuities for increased benefits
A frequently overlooked advantage of annuities is the higher rates offered to individuals with certain health conditions. If you suffer from ailments such as heart disease or diabetes, or have a history of smoking, you may qualify for increased payouts. This is because insurers consider life expectancy when determining annuity rates, with shorter expected durations leading to larger income payments.
For many retirees, underlying health issues can present an opportunity to significantly enhance retirement income. To maximise these benefits, we can obtain quotes to ensure you are fully informed.
Exploring fixed-term and temporary annuities
While lifetime annuities offer long-term stability, they are not the only choice available. Fixed-term annuities provide guaranteed income for a set period, such as five or ten years. After this period, retirees can reassess their options based on any changes in personal circumstances or financial markets.
Temporary annuities help bridge short-term gaps, such as qualifying for the State Pension or waiting for more favourable investment conditions. Their flexibility makes them an attractive option for those reluctant to commit to longer-term plans.
Phasing your annuity purchase
Phased annuity purchases enable you to balance cash flow and investment growth. By only exchanging part of your pension fund for an annuity, you secure a guaranteed income while keeping the rest invested. This strategy could allow you to benefit from future market growth, although gains are not guaranteed and involve risks.
Furthermore, delaying annuitisation could lead to better rates. As annuity providers consider lifespan when determining payments, older individuals or those with health issues may receive higher incomes due to their shorter expected durations.
Certainty in an uncertain world
With improved annuity rates and customised options, there’s never been a more suitable time to think of them as a key part of your retirement planning. They provide certainty in an unpredictable world, allowing you to enjoy your retirement without concerns about running out of income.
However, always remember that annuity decisions are final, so you must ensure you can make informed choices.
This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. The value of your investments can go down as well as up, and you may get back less than you invested. Past performance is not a guarantee of future results. Tax planning is not regulated by the Financial Conduct Authority.