Which Retirement - Annuity Protection

When reviewing clients retirement choices and retirement pension many clients worry about committing to a lifetime annuity not knowing how long their lifetime will last! For many the annuity route is the most suitable and this area of concern can be answered by way of building in options for family and dependents.

Guaranteed Period - If the annuitant were to die soon after starting their annuity (and they had not selected a Guarantee Period, their income would stop and no further payments would be made.

A guarantee period will ensure that income will continue to be paid until the end of the guarantee period, which is usually five or 10 years from their first payment.

• Choose between one and 10 years (maximum), typically most people consider five or 10 year guarantees
• The longer the guarantee, the lower the initial income will be
• The annuitant can nominate anyone to receive the income from the guarantee either directly to the annuity provider or through a will
• If they live past the guarantee period their income continues, but when they die nothing will be passed on, the income will just stop (if no other options have been chosen)

Dependents Pension

This allows the benefit from an annuity to transfer to a dependent such as a spouse or civil partner, should they die before the dependent. Different amounts of the annuitant's income can be covered in this way, for example 50%, 100% or a particular percentage depending on their financial needs and circumstances.

• When the annuitant dies, the annuity income switches to pay the dependent, which pays them an income in the same way, for the rest of their life
• Your client can provide the medical details of their dependent so they can be factored into an enhanced quote
• It is worth considering this option in conjunction with any other provisions that may already be in place such as other pensions, savings or life assurance policies

Value Protection – As clients may be concerned they will not see full value from their annuity if they pass away in the early years following the initial purchase they may wish to consider Value Protection. With Value Protection, some money will be returned to your beneficiary(ies) should you die without having received the full value of your pension fund (subject to a tax recovery charge, currently at 55%).

When you take out your annuity, you can choose to protect a percentage of your pension fund, up to 100%*. The lump sum payable when you die is the percentage of

your pension fund that is protected, less the total gross annuity payments already paid to you.

Like all options with annuities you also have to way up any drawback, Adding these additional benefits from the start will reduce your annuity payments and it will depend on how many benefits you include. Therefore it is vital to look at affordability and the long term consequences of these benefits.

Tax treatment depends on individual circumstances and may be subject to change in the future.

By Louise O'Reilly

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