Basically an annuity is an insurance product which pays out an income, which can be used as part of a retirement strategy. If you are looking to access a steady stream of income in your retirement, then this could be used as part of your overall pension plan.
An annuity works by making an investment in the annuity, it then makes payments out on a future date or dates. How the annuity is eventually paid out depends on your individual needs, it can be paid monthly, quarterly, annually or as one lump sum payment.
Like any investment, the size of your payment into the policy, and the duration of payments effects how much you will receive. If you take out a guaranteed payout - fixed annuity or payout stream, is determined by the performance of the annuity’s underlying investments.
Investing in an annuity can be useful as part of an overall pension plan, but it is important to understand that with a annuity comes high expenses, so it would not be advisable to invest just in an annuity.
It would be a good idea to contact an IFA, like Enable Independent, before making any long-term investment choices, to discuss your own individual retirement needs. The individual and group pensions market is an ever changing world, with new legislation being brought out on a regular basis, it is difficult to keep track of what options are available with regard to your retirement planning. Hopefully within this section of our website we can explain many of these options in plain simple language and help you plan for your future. This information is purely intended as guidance and therefore if you require any specific advice please contact us directly for independent financial advice.
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