When you are looking to make an investment in an annuity, there are so many options available that sometimes you can feel you’re in a financial minefield. The best types of investments are very personal and depend on your circumstances, so there is rarely a one-size-fits-all answer.
One path you could explore is a with-profits annuity. Essentially, an annuity is a type of insurance policy your premiums are converted into an income which is paid to you for an agreed number of years. This is known as a guaranteed annuity. Your money is invested into funds which generate a fixed sum regardless of circumstances.
With-profits annuities will link the level of the income you receive directly to the performance of the funds you have chosen for your investment. This means that if your investment fund performs well, your income is likely to be higher than you would get from a guaranteed annuity and you could be looking at further growth in the future. But if the fund underperforms or does not reach a required level of growth, then your payments will be lower and could decrease further. It is therefore a riskier type of investment.
When you take out your with-profits annuity, you will have to choose the rate of increase each year. This means that your investment fund(s) will have to set their bonuses at a certain level in order for you to receive the increased payments. You also need to establish benefits, such as those for your spouse. It is very important that you choose these levels carefully and take financial advice if necessary, as you won’t be able to alter these figures later on under any circumstances.
If you think a with-profits annuity could be right for you, then you should speak to an Independent Financial Adviser (IFA). They will be able to help you assess your circumstances to establish whether your financial position is appropriate for this type of investment. They can also highlight to you the potential risks involved, outline the possible benefits and work with you to establish the rate of increase you would like to set.
When you are looking for the right funds to invest in, it is important to do your homework and an IFA will be able to help you. You need to look at the past performance of annuities to establish which is best for you. These figures can be complex, as bonuses don’t always reflect performance, so it is vital that you do your research thoroughly.
Once you are armed with all the necessary information, you can make an informed decision about whether this type of investment is suitable for you and your family
Use our simple calculator to see how much your income is likely to be.Try the calculator
You could qualify for an enhanced annuity if you have a medical condition or lifestyle that means your life expectancy might be shortened.See if you qualify
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