With profits annuities- A Quick Guide

To get over the perceived lack of flexibility and the potential erosion of your income due to inflation, with profits annuities work by investing your lump sum in the with profits fund of your chosen insurance company. By doing this, you bear the investment risk, not the insurance company.

At outset, rather than opting for a level annuity or one which increases each year, you assume a bonus rate. This will be the bonus rate applying to your with profits fund and if the fund achieves the bonus rate that you have assumed, your with profits annuity will remain level. If the bonus rate applied to the with profits fund is higher than that which you have assumed, your annuity for that year will rise and conversely, if the bonus rate falls, then your annuity will also fall for that year, or until bonus rates rise again above the level of bonus rate that you assumed at outset.

So, if you assume a bonus rate of 3%, and that is what is achieved, your annuity remains level. If after three years, the bonus rate increases to 5% (because of favourable equity markets) then your annuity income will rise too.

Thinking of buying a With Profits Annuity? Our Annuity Service provides:-

  • Depending on your pension provider up to 30% More Annuity Income
  • Specialist advice on different types of annuity arrnagement including investment annuities
  • Assessment of your circumstances to find the most suitable type of annuity for you or whether there are any other options more suited to you.
  • Information & Advice on lifestyle annuities – including  smoker annuities and impaired health annuities you may get even more annuity income.
  • Comparing annuity rates to ensure that you maximise your annuity income.
  • Explaining the annuity options available to you.
  • Helping you with the relevant paperwork to ensure that you annuity is processed smoothly.

Call us on 0800 043 0725