P261 CEEFAX 2 261 Fri 17 Jan 21:14/22 1/8 An annuity provides a regular lifetime income from a lump sum investment. Thjte are two types: 1/Compulsory Purchase Annuity (CPA) These are bought from pension funds. Normally pension plans allow you to buy a better annuity from anothjt life firm. This is the Open Market Option. 2/Purchased Life Annuity (PLA) PLAt are bought with your own capital and provide a vjty high income. CPAs: Mali 264 CPAs: Female 263 Sport 300 Front Page 100 CPA min YourMonjy City News Main MenuP261 CEEFAX 2 261 Fri 17 Jan 21:28/32 2/8 U@@ /E£C£$£££"££C O[[^[ Annuity rater are calculated with regard to life expectancy, returns on fixed interest investments and life company expenses. Rates increase wijh age, and rise ot eall depending on the return on the current yields from medium dated gilts. Annuities are for life, so there are several options that provide protection from early death, such as guaranteq pjtiods and spouse's benefits. Annuities can increase each year as a hedge against inflation. Selection of annuhty r res 262-267 Sport 300 Wjathjt 400 Front Ppge 100 CPA m n YourMo y C t iw M in M nuP261 CEEFAX 2 261 Fri 17 Jan 21:25/13 3/8 Single or Joint Life Annuities A single life annuity ceases on the death of the annuitant, but you can choose to have the annuity payments continue to your spouse if you die before him or her. The spouse's annuity can bj cut on the intents death, usually bz 33.3% or 50%. Guarantee Periods Annuities can be guaranteed for a specified period usually 5 or 10 years. Payments will be made for that pjrioh, even if the annuitant dies. CPA Rates: Joint Lif 264 Sport 300 Weathjt 400 Front Page 100 CPA min YourMonjy City News Main MenuP261 CJEFAX 2 261 Fri 17 Jan 21:26/22 4/8 Escalating Annuities (EA) Annuities can increase bz a fixed percentage, normally 3% or 5% ot in line with the retail precis index. n avjtage an annuity increasing bz 5% compounded a year will give a starting income 30% lower than a level annuity. Normally the EA will overtake the level annuity after about 10 years. Although expensive in the short term, escalation does protect annuity payments from the effects of inflation. Sports news 300 TV/Radio 600 Weathjt 400 Front Page 100 CPA men YourMonjy City News Main MenuP261 CEEFAX 2 261 Fri 17 Jan 21:1,/44 5/8 Frequency of Payment Most annuities are quoted monthly. By convention CPAs are quoted in advance and PLAt in arrears. Advbnci: Payment is made at the beginning of the period. Arrears: At the ind of the period. Payments can also be made annually, half yearly or quarterly. Annually in arrears will give the highest payment but quarterly in arrears is the most common alternative to monthly payments. Spo ts N ws 300 W athet 400 TV/Radio 600 Front Page 100 CPA min YourMonjy City News Main MenuP261 CEEFAX 2 261 Fri 17 Jan 21:10/01 6/8 Taxation Compulsory Purchase Annuities are taxed as earned income and are usually paid net of basic rate tax. Purchased Life Annuities. Each payment includes a repayment as part of the original capital, known as the capital content. This is deducted from the gross annuity before applying your tax rate. Thus PLAt have a significant tax advantage because tax is paid only on a small amount of each payment. Annuity Rates pager 262 to 267 Sport 300 Weathjt 400 Front Page 100 CPA men YourMoney City News Main MenuP261 CEEFAX 2 261 Fri 17 Jan 21:12/27 7/8 U LA If you are in bad health, you may be able to increase your annuity by applying for an impaired life annuity. Two companies, Sun Life and the Pension Friendly Annuity Society, offer better rates for those with medical conditions such as heart problems and cancer. Stalwart Assurance offers higher rates for smokers, those with diabetes, high blood pressure and high cholesterol. CPA Annuity Rates: Mali 262 CPA Annuity Rates: Female 263 CPA Joint Life Rates 264 Purchased Life Annuities 265 BBC CEEFAX FRONT PAGE 100 CPA min YourMonjy City News Main MenuP261 CEEFAX 2 261 Fri 17 Jan 21:14/06 8/8 The annuity tables on pages 262-5 show the top paying companies for a purchase price of £10,000 and £100,000. Higher purchase prices will give a slightly high rat . Rat s w ll also be affected bz exact age and choice of benefits. Thjte are companies which offer good rates which are only available to specieic groups. These are not quoted. For example, The Royal National Pension Fund for Nurses. CPA Annuity Rates: Mali 262 CPA Annuity Rates: Female 263 CPA Joint Life Rates 264 Purchased Life Annuities 265 B C CEEFAX FRO T P—GE 1 CPA men YourMoney City News Main Menu