What Income Are You Likely To Get From An Annuity?

By Martin Wright

Annuity earnings are based on a number of variables to do with your present circumstances and the pension fund that you have accumulated. Firstly , your age is a key factor in deciding and determining how much annuity income you'll receive in retirement. This is because an individual that takes out an annuity at a younger age has a far greater life expectancy in comparison to someone of an older age. The annuity provider reflects this in the amount of earnings that they pay.

Frequently people defer taking their annuity for long periods of time on the expectation that they'll receive greater annuity earnings later in retirement. This reasoning concerning annuities is completely sound of course; however , one area that is frequently ignored is if you take an annuity out earlier in your retirement you will get a greater number of annuity income payments, which means that the price that you receive over the long term might be equivalent and comparable.

The amount of annuity income with regard to age is worked out by an actuary that's taking a look at an area called mortality risk and, given that life expectancy is much increased these days than it was, compared to say 10, 20 or 30 years previously, annuity rates are consistently falling over a period of time. Therefore it may be considered that in taking an annuity earlier, you secure the rate as it is today and avoid the chance of a declining annuity rate later.



Second, an annuity as a life insurance product is basically underwritten as the health level of the annuitant can be considered to determine the level of annuity earnings that is paid. Those with poor health can often expect to get an increased level of annuity income as medical problems may impact the actuary's view on the annuitant's life expectancy.

If you needed to start receiving the benefits of your pension earlier on than planned, rather than taking out an annuity you might opt to take an early pension release. When you have reached age 55 you're able to take up to 25% of your complete pension amount, fully tax free (although this will affect your earnings in retirement).

When it comes down to planning your retirement, there are plenty of options available to you and it pays to be as educated as possible before any final decisions are reached.

About the Author:

Info thanks to Adviser Hub. We do suggest that before making any decision regarding your annuity or taking an early pension lump sum, that you complete a full pension review with the aid of a qualified pensions adviser.