Some annuities guarantee your income for a specific number of years, even if you die before the period is up.
Others offer value protection which ensures any remaining funds will be paid to your dependants if you die sooner than expected.
Once you’ve chosen an annuity, it's permanent and you can’t normally change it at a later date. That means it’s extremely important you make the right choice. Making the wrong choice could reduce your retirement income drastically.
Our annuity experts are here to talk you through the best approach for you.
You have the right to choose who to buy the annuity from. You can also choose what type of annuity to buy or buy one at a later date when you’re ready.
You can choose how often you want to receive your income: monthly, quarterly, half-yearly or yearly. You can also choose when the money goes into your bank account - at the start (in advance) or the end (in arrears) of each period.
Being paid ‘yearly in arrears’ will give you the highest income, as this gives the provider company more time to invest your funds. ‘Yearly in advance’ will provide the lowest income.
A Joint Life annuity will pay you an income for the rest of your life. It will then go on to pay an income to your spouse, civil partner, or a dependant for the rest of their life after you die.
You can decide whether your annuity will pay a fixed income or one that increases to protect you against inflation.
You can guarantee your annuity for a specific number of years. This means it will continue to pay the income even if you die before the specified period is up. Selecting a guarantee period will provide a slightly lower level of income, but it guarantees that your estate continues to receive the income.
Value protection is a way of protecting the value of your annuity in case you die earlier than expected. If you take this option, you can choose to protect a percentage of the fund that was used to purchase your annuity. Then if you die before this has been used up – what remains will be returned to your beneficiaries as a lump sum – less tax of 55%.
For example lets say you chose to protect 50% of your pension fund of £50,000 that what used to purchase your annuity (in other words protecting £25,000), and you were receiving an annuity of £2,000 a year. If you died after 10 years, then we would have paid £20,000 out (£2,000 x 10 years) – leaving £5,000. Less tax at 55% means that £2,250 would be returned to your beneficiaries.
You may be able to benefit from an enhanced or impaired life annuity which pays a higher income if your lifestyle or your health could reduce your life expectancy. Even if you think you’re healthy, if you’re a smoker, overweight or taking any medication it could boost your retirement income.
How much tax you pay depends on your personal circumstances. Please see the Key Features for details of how your annuity payments will be taxed. Any references to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which can change.
The table below will help you understand the differences between an LV= Pension Annuity and an LV=Pension Income Plus Annuity.
Please read the key features documents for both annuities for more details – or speak to one of our annuity advisers, who will help you make the best decision for you.
Pension Income plus Annuity
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