Various types of fixed annuities at the time of retirements
By: Mike Anderson
Submitted: 2011-05-16 00:45:28 | Word Count: 532
A retirement annuity plan is a UK pension plan, which is designed to build a lump sum amount for retirement. The plan has made like this way where part of the lump sum must used to buy an annuity and part can take a tax-free lump sum. The plans were introduce under section 226 of Income and corporation Taxes Act 1970 and often referred as section 226 contracts. They are presently legislated under section 620 of the Income and Corporation Taxes Act 1988. Therefore, the plans also known as section 620 contracts. The income and gains in the retirement annuity plan are free from tax. At maturity, you can take tax-free cash.
Retirement annuities give you dependable security. If you are about to stop working retirement annuities is one of the good place to invest a lump sum amount. Retirement annuities are a stream of income that will continue for the rest of your life. You can purchase retirement annuities with funds from various possible sources e.g. a maturing certificate of Deposit (CD), money that has accumulated in a deferred annuity account or from a tax qualified defined benefit fund or from IRA account.
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Retirements annuities can be fixed annuities and variable annuities. The income payments that anyone receives from the fixed annuities will never change It depends on the onetime payment that you contribute at the time of purchase of the retirement annuities. It also depends on the interest rate environment at the time of purchase.
Among this retirement annuities, fixed annuities are most commonly used by the people as it gives a stabilize income from the investment. Fixed annuities are the insurance contracts, which offer a set of amount of income paid at regular intervals for a specified period. In fixed annuity, there are advantages and disadvantages too. When someone is purchasing a fixed annuity, it is important to remember that he can often negotiate the price of these products means annuities.
Fixed annuity are mainly two types e.g. life annuities and term certain annuities. Life annuities pay a predetermined amount until the annuitant die. However, the term certain annuities pay a predetermined amount for a regular interval (usually monthly) until the annuity expires. The expiry can be happen before the death of the annuitant.
There are various kinds of life annuities among fixed annuity. The types depend on the insurance components that they provide to the annuitant. In certain types of annuities may alter the future payment structure if something worst happens to the annuitant, such as sickness, early death. The amount of monthly payment depends on the life expectancy of the annuitant. The lower the expectancy higher will be the payment. Straight life annuities are the simplest plan. Once the phase begins, the annuity pays a set amount monthly until the annuitant passes away.
Term Certain Annuities of fixed annuity are a different product. It gives the payment to a specified date, no matter what happen to the annuitant. The insurance company keeps the reminder of the annuity's value.
