We all wish to have a secured future even after we retire. Savings for retirement are very important especially when the whole hard earned money goes into pension. There steps in the annuity. Today, with so many options coming up, still the most popular way of getting pensions is buying yourself a lifetime annuity.
Going by the dictionary, it is defined as an insurance contract in which the annuity rate is used to calculate the amount of income that will be paid followed by investment of total annuity. Moreover, it is used as an income steam for retirees. In technical language, annuity is basically the financial product that an individual gets out of a fixed steam of payments. They are created and then sold to individuals by financial institutions which accept funds. Upon annituization, the payments are then issued to the ones who invested at a later point of time. The earlier the retirement age, the longer the money will have to last. They are useful in not just saving money for retirement but also help to protect against losses in stock market and tax deferral.
Who sells them?
Life insurance companies and investment companies are the major institutions now days that offer annuity products. Life insurance companies deal with risk of policy holders’ early death. But still, it is a bridge to their insurance products. The brokers and the agents earn very high commission on these annuity rate contracts.
How is annuity rate calculated?
The amount of income that a buyer receives from a provider does not only depend on the retirement age but also a number of factors which include both personal and external influences like:
- The earlier you retire, that means more saving till the time you die; this can happen only when at younger age, the income was low.
- People suffering or having any kind of medical conditions, will have a higher income. Thus your lifestyle plays an important role here.
- Often men are paid more because it is believed that women live longer than men.
- The annuity provider most of the times invest the pension money in short term government loans known as gilts rather than investing them in stock market.
With so many licensed insurance agents/ brokers now days, it is not compulsory for everyone to just go with the flow and buy annuities offered by the pension provider. In this tech-savvy world, it is better to first compare the rates of different providers because the annuity rates are also taxed just like the income you get is.
Start-up companies like Benjamin provides the customer with simple products that at the end of the day give excellent value.