Retirement Planning information from Barclays Stockbrokers - What options are there?
What options are there?

What options are there?

The way you set up your annuity and the options you add will both affect how much you and, if required, a spouse/dependant will get paid.

 

​Policy type ​What it does ​How to tailor it  ​Things to think about
​Single Life ​Pays you an income for the rest of your life. Payments will stop on your death.
​You can choose to add any of the options detailed in the tables below. 

​Pays a higher income than a joint life policy but payment stops on your death.
​Joint Life (giving a partner or dependant a pension after your death) 

​Pays you an income for the rest of your life.

If you pre-decease your spouse or partner an income will be paid until they die.

​The planholder can choose the percentage of their pension income  to be paid to the survivor after their death.

This is often less than 100% as a single survivor's living expenses are reduced compared to a couple between 1% and 100% (usual options are 100%, 67% and 50%).

​Pays a lower income than a single life annuity but your family will be provided for.

The higher the level of income you choose for yourself, the lower amount of income your spouse or partner will get.

 
The basic annuity is a single life level annuity but you can add other options to your annuity whether it’s single or joint life.

Some of the options are:

 

​Options ​What it does ​How to tailor it ​Things to think about
​Level annuity ​Pays you a set income which is fixed when you set up your policy. ​You can add a guarantee period of 5 or 10 years (see below) and choose how often you receive your payments. ​Pays you a higher income than an escalating annuity (see below) Inflation could reduce the buying power of your annuity.
​Escalating annuity ​Your pension income goes up each year to protect against inflation, so that you can afford the same things in five years' time as you can today. ​You can choose to increase your pension by: any percentage normally up to 5% pa.

​Pays a lower income than a level annuity initially.

Your income increases each year, though it may take many years before you receive more money than you would have under a level annuity.
​Index linked annuity ​Your pension income goes up each year to protect against inflation, so that you can afford the same things in five years time as you can today. ​You can choose to increase your pension by:
an inflation index, using Retail prices (RPI) or Consumer prices (CPI).
​Pays a lower income than a level annuity initially.

Your income increases each year, though it may take many years before you receive more money than you would have under a level annuity.
​Guarantee period ​Guarantees to pay your pension for a minimum number of years. These payments will continue to your estate if you die before the guarantee period is finished. ​You can choose between
5 or 10 years.
​Your initial income will be lower than with no guarantee period.

Generally it's not an expensive option to add and can provide some protection for your family.
  
Although all the above are valuable additions, they will reduce the income you would receive. 
 

Below is an example of how this could impact a pensioner’s income:

Mr Johnston is a 65 year old, with a wife aged 60. He has a pension fund of £150,000, which he wants to use to buy an annuity. After taking his pension commencement lump sum of £37,500, the balance fund of £112,500 could purchase the following options.  
  
 
example table of income

 All figures are based on annuity rates at published in Moneyfacts September 2010 and are for illustration purposes only.

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