P271 CEEFAX 271 Sun 28 May 01:55/27 1/7 NNUIT ES 7£££££££££££££££££££££££££££££££££££££k An annuity provides a regular lifetime income from a lump sum investment. There are two type : 1/Compulsory Purchas Ann ity (CP—) These are bought from pension funds Normally pension plans allow you to buy a better annuity from another life compan . The i known as th Open Market Option. 2/Purchased Life Annuity (PLA) PLAt are bought with your own capital and provide a very high income. CPAs: Male 272 CPAs: Female 273 CP M n P m n P J iP271 CEEFAX 271 Sun 28 May 01:45/12 2/7 A NUIT S Annuity rates are calculat d with regard to life expectancy, returns on fixed interest in tm nus and life compan xpjns s. This means that rate increase with age, and ri or a l dip d on the return on the current ields from medium dated gilts. As an annuity is for life, th re are a numbj of options that proved protectio from a l death, such as guarantee periods and spots 's benefits. 0 Annuities can increa3e each year a a aims nflati n. CPA M n CPA Won n CPA Joint PLA RatesP271 CEEFAX 271 Sun 28 May 01:15/21 3/7 N IT S I Single or Joint Life Annuities A single life annuity cease on the death of the annuitant, but you can choo to ha th ann t pa m nt continue to your spouse if you die before him or her. The spouse's annuity can be reduced on the intents death, usually bz either 33.3 or 50%. Guarantee Periods Annuities can bj guaranteed for a specified period usually 5 or 10 years. The annuity payments will bj made for that period, even if the annuitant dies. CPA Rates: Joint Life 274 CPA M n CPA Won n CP Joe t PLA R teP271 CEEFAX 271 Sun 28 May 01:35/44 4/7 ANNUIT S ££££££££££££ £ ££ £ £ Escalating Annuities (EA) Annuities can increas by a fixed percentage, normally 3% or 5% or in line with the retail price index. 5 On average an ann ity increasing by 5% compounded per 9ear will gi6e a starting income 30% less than a level annuity. Normally the EA will ovjrtakj th level annuity after about 10 years. Although expensive in the short term escalation does protect annuity payments from the effects of futur inflation. CPA M n CPA Won n CPA Joint PLA RatP271 CEEFAX 271 Sun 28 May 01:55/47 5/7 n2n2 |.% S I Frequency of Paym nt 5 Most annuities are quoted monthly. By convention CPA are quoted in advance and PL s in arr ar . Advance: Pa mint is made at the beginning of the period. Arrears: At the end of th p riod. Pa mints can also bj made annually, half y arly o quart ly. Annually in arrears will give th highest payment, but, quarterly in arrears is the most common alternative to monthly payments. CPA M n CPA Women CPA Joint PLA R teP271 CEEFAX 271 Sun 28 May 01:47/21 6/7 ANNUIT ES I Taxation Compulsory Purchase Annuities are taxed as earned income and are usublly paid net of basic rate tax. Purchased Life Annuities. Each payment include a r payment as part of the original capital, known as the capital content. This is deducted from the gross annuity before applying your tax rate. $hus PLAt have a significant tax advbntage because tax is paid only on a small amount of each payment. CPA M n CPA Won n CPA Joint PLA RatesP271 CEEFAX 271 Sun 28 May 01:15/24 7/7 ASNUITPES I The annuity tables on pages 272-5 show the top pa ing companies for a purchase price of £10,000. Higher purchase prices will give a slightly higher rate. Rates will also be affected b exact age and choice of benefits. here are companies which offer good rates but are only available to specific groups. These are not quoted, eg, The Royal National Pension Fund for Nurses. CPA Annuity Rate : Mal 272 CPA Annuity Rates: Female 273 CPA Joint Life Rates 274 Purchased Life AnnuitiDs 275 CP M n CPA W m n CP J i t tP271 CEJFAX 271 Sun 28 May 01:p8/31 ] G BUYING GENE"AL OIO U" "5 $nn itb rat s ash calcblatW bwiuh jm@to imps#ve tPe effectivUness of "5 tn Axsd inteonst iBrjttmh@t d In3z:jry+ Cg4u0gv Xrpsttqd 1yj Y d * Mm5e inbormatimn 6ill nor be avbilabli to hklp polieyholdjrs 0 who have a complaint. r m m di5 1 d 0 u : £ M 2 1 25 were@soHd a product and to gore@ U ar a number 1f opt.o5 1h4. 1 FT-UE 3311.1 -17. at CFWSE aiIjh at hjightenjng consumer Ann iti s can increase ach par a anhzhge again t inflation.g ge 0 Annurty +pdate 204 @ Arrivbls 205 CPA Mj CPA dame CPA J6als F0StReks