Purchased Life Annuity

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I want a standard pension annuity quotation (includes fixed and variable rates).
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I want a purchased life annuity quotation (not for pension funds).
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I want a quote for long term care annuity.
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Purchased Life Annuity

If you require a quote for a purchased life annuity please click the quote button
If you would like an overview of the different types of available annuity please click here

A purchased life annuity is one that is purchased with your own cash, be it money you have in the bank or building society, or the tax-free cash element from your pension fund. Many retirees purchase this type of annuity to augment their retirement income, either at the point of retirement, or later on in retirement. Whereas all income from a pension annuity is subject to income tax, part of the income from a purchased life annuity is treated as a return of your own capital, and is not taxed. This portion is known as the capital content and is based on the annuitant's age.

The older you are when you purchase your annuity, the higher will be this capital content. Older annuitants generally receive an extremely attractive guaranteed income return from a purchased life annuity. UK IFA Net Ltd have found that purchased life annuities are bought by people who want to maximise their income and are not concerned about leaving money in their estate when they die. They are also used as a means of meeting the expense of nursing home fees and long-term care.

Most of the optional benefits that can be taken with these annuities are the same as for a pension annuity. Purchased life annuities normally offer the choice of a guaranteed period or capital protection. Capital protection simply means that should you die having received (in total gross income) less than the original amount invested, the balance is repaid as a lump sum to your estate. It follows that you may not have a combination of capital protection and a guarantee with the same annuity. Also remember that if neither capital protection nor a guaranteed period is selected, there will be no return of capital on your death, and as such the initial income will be higher.

In some cases you can also buy a purchased life annuity which will defer paying income until a future date. For example, this could be used for nursing home fees. For joint life purchased life annuities you can obtain a higher initial income by selecting the option of having a reduced income on the death of the first life.

Purchase Life Annuity - A Case Study
A male aged 75 and paying 20% tax was quoted a gross annual annuity of £12,228 from a purchase price of £100,000. The capital content, which is not taxable, was £9,370, leaving only £2,858 as taxable income. The net annuity receivable was therefore £11,656 ? a tax equivalent of only 5% on the total annuity income.

A 40% taxpayer would actually pay about 10% tax on his total annuity income.

Cost Comparison
A male aged 75 would receive £12,228 for a level annuity.
For a guarantee period of 5 years, this would be £11,478
For a guarantee period of 10 years, this would be £9,776

Choosing Capital protection would reduce his income from £12,228 per annum to £9,127 per annum.

A purchased life annuity will pay you an income for the rest of your life. Our advisers believes this type of annuity is suitable for someone who wants to boost his or her income for at least the rest of his or her life.

A temporary annuity will pay you an income for a pre-selected period, provided you are alive during that period. Once the period has expired, no further income is payable. This type of annuity is best suited to someone who wants to boost his or her income only for a specific number of years.

Compare annuities

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