Tag Archives: Pension Savings

Can I Have a Tax Free Annuity?

There is no such as a tax free annuity. However, in a way, everyone can receive a kind of ‘tax free’ annuity, thanks to the tax free lump sum from your pension pot that you can use to purchase an annuity.

Currently you are able to get up to 25% of your pension pot as a tax free lump sum, which can then be used as an annuity fund to invest in an annuity scheme. An annuity scheme turns the lump sum into annual or monthly income during retirement. However, it is important to note that annuity income, which is the income you receive from an annuity provider, is treated as taxable income. This means that although your annuity fund can be tax free, it is not entirely a tax free Annuity, and the income you actually receive from the annuity provider is taxed by HMRC.

The amount is taxed at the appropriate tax band, depending on how much money you receive from the annuity. The annuity provider will deduct the tax before you receive the payment. The fact is that for most pension schemes today – the pension savings need to be converted into an income by investing the money into some investment product. This could be an annuity or an income drawdown plan.

An annuity is where the savings are converted into a regular income and an income drawdown plan is where you withdraw money from the savings as and when you need them. The advantage of an annuity is that although the income is taxed and there is no such thing as a tax free annuity, it is guaranteed for the agreed term of the annuity and you receive it at regular intervals. Depending on the type of annuity you can receive a taxable income for as long as you live, or until the end of a fixed term.

While annuity turns your savings into guaranteed income, income drawdown keeps your savings invested in external investments like stocks and shares, and you can withdraw the money as and when you need additional income. This is also taxable as per the appropriate tax band.

A tax free annuity does not exist in the sense that the income from an annuity is always taxed. However, everybody is entitled to a tax free lump sum from their pension savings which can be used to generate an income during retirement, either through an annuity or through an income drawdown plan.

Online Comparison Websites Will Help You Compare the Annuity Open Market

As we are living for longer, planning properly for financial security during old age is becoming increasingly important. It really is imperative to consider all the alternatives carefully and choose products and investments that will help you optimise your savings and assets. A large proportion of people buy an annuity to turn their pension savings into a steady guaranteed income during retirement. There are many different types of annuities, and several annuity providers. So rather than take the first offer that is made to you by your pension provider, it is advisable to explore the Annuity Open Market and make an informed and well considered decision.

The best place to look for more information about different annuities and how they work is of course the internet, where you can access lots of information about all things annuity related. You can find information on websites of annuity companies, as well as from independent charities and organisations working in the area of retirement finance. Once you have gained some knowledge about the different options available in the annuity open market, you will want to compare different products in order to make the right choice.

There are many comparison websites out there that allow you to compare different utilities, services and products – and the same is true of annuities as well. Today, you can find a number of annuity comparison websites that allow you to compare products from the entire annuity open market. Most websites are free, however, some websites may charge a fee should you decide to buy an annuity through the website at the end of your search.

Some websites offer comprehensive financial advice, tools and other resources to help understand different products and make informed decisions. The newest addition to such websites is Hargreaves Lansdown, which has an entire section on retirement planning, financial products for the retirement sector, as well as an online pension calculator that lets you explore the pension and annuity open market, and calculate the maximum income you could generate. The pension calculator is among other tools like the annuity delay calculator.

Another familiar name has recently been added to the annuity open market and this is Tesco. If recent news reports are to be trusted, Tesco are set to enter the annuity market with its own annuity product in the near future. They are also planning to launch their very own online annuity comparison tool that can help customers compare different annuities and choose one to suit their needs.

Are you a Baby Boomer looking for Annuity Solutions?

For baby boomers, retirement is quickly approaching. With retirement, come several questions as to how retirement can be funded, how the lifestyle to which consumers have grown accustomed can be maintained even after the working years have ended. However, there are options available to consumers, including baby boomers that are looking for ways to retire comfortably and quickly. Two of the most prevalently used options available to baby boomers are annuities and equity release schemes, both of which could potentially help consumers retire comfortably and on their terms. Between both of these retirement options, each consumer should be able to find a way to retire that fits their individual and unique needs.

Annuities

There are several different types of annuities available to consumers, each with their own set of advantages and disadvantages.  However, most of them operate similarly in that the consumer trades in their pension savings in return for income that is guaranteed for the rest of their life.  The income is guaranteed and relies most substantially on the pension savings that has been accrued by the consumer. Once the consumer has chosen their annuity, no alterations may be made. That is to say that the consumer needs to ensure that they are making the right decision when they choose their annuity. With so many options available, the choice can be challenging but it can also be worthwhile in that it guarantees a certain level of income for a predetermined period of time, most often the lifetime of the insured.

Equity release

Equity release schemes are another options available to baby boomers, and any other consumers who are nearing their retirement years. Equity release schemes are available to those UK homeowners who are aged 55 or older. The purpose of the scheme is to allow the consumer to receive tax-free cash from the value of their home. This cash can be spent however the consumer sees fit. It works best for those consumers or baby boomers who are looking for a tax-free lump sum to help fund retirement, the ability to release cash whenever most needed, or the freedom to spend cash independently.

Regardless of how baby boomers choose to fund their retirement, whether it be through equity release mortgages, annuities, or other investment strategies, they should always consult with a financial adviser before investing in any particular strategy in order to ensure that the decision is the best one possible for each baby boomer’s individual and unique retirement needs.

What is an Annuity Calculator?

For those consumers who plan on purchasing an annuity with their pension savings, an annuity calculator can be a very beneficial and useful tool. An annuity calculator is a guide used by consumers to help gauge exactly what type of income they can expect to be paid to them once they have retired. There are several factors used to determine income amount and the annuity calculator takes these factors and computes a reasonable estimate of income. While the number is truly just an estimate, it can be used by the consumer to better plan for the future. This means more accurate budgeting and planning for after the working years.

Consumers should always consult with an annuity calculator, most of which are free and easily accessible on the internet, before making any kind of retirement or investment decisions. This is because the annuity calculator can help the consumer to better understand what they can expect from their retirement. This proves incredibly beneficial to the consumer, especially the consumer who does not truly understand how their annuity works or what amount of income they should expect from their built-up pension savings.

Most annuity calculators ask for the same information in order to compute income amount. Fields include such factors as age, health status, and estimated current pension value. Having an annuity calculator determine estimated income amount is crucial for any consumer who is looking to use their pension savings to fund an annuity. Most consumers need to at least have some kind of understanding of what their income will be once they have ceased working. This allows for more sensible planning and investing. For those consumers who are diligent in their planning, consulting with more than one annuity calculator can help to better estimate retirement living. It can determine the accuracy of the estimate and allow consumers to rest assured that they have a grasp of what their financial future may be once they have retired.

For consumers who use an annuity calculator to help estimate their income after retirement, they must keep one crucial fact in mind. Annuity calculators should truly only be used as a guidance tool. They are not perfect and they do not always compute the exact income amount that can be expected, especially given that there are so many different annuities, all of which have different advantages and disadvantages and some that will even pay out more over an expected shorter period of time, such as an enhanced annuity. Despite the idea that annuity calculators can only give income estimates, they are truly worthwhile and beneficial for those consumers looking to better manage their retirement years.