P271 CEEFAX 271 Sun 9 Apr 02:24/06   1/7  ANNUITIES   An annuity provides a regular lifetime income from a lump sum investmentN There are two types: 1/Compulsory Purchase Annuity (CPA) These are bought from pdnsion funds Normally pension plans allow you to buy a better annuity from another life companyN This is known as the Open Market Option 2/Purchased Life Annuity (PLA) PLAs are bought with your own capital and provide a very high incomeN CPAs: Male 272 CPAs: Female 273 CPA Men CPA Women CPA Joint PLA Rates
P271 CEEFAX 271 Sun 9 Apr 02:24/05   2/7  ANNUITIES   Annuity rates are calculated with regard to life expectancy, returns on fixed interest investments and life company expensesN This means that rates increase with age, and rise or fall depending on the return on the current yields from medium dated giltsN As an annuity is for life, there are a number of options that provide protection from early death, such as guarantee periods and spouse's benefits Annuities can increase each year as a hedge against inflation  CPA Men CPA Women CPA Joint PLA Rates
P271 CEEFAX 271 Sun 9 Apr 02:34/20   3/7  ANNUITIES   Single or Joint Life Annuities A single life annuity ceases on the death of the annuitant, but you can choose to have the annuity payments continue to your spouse if you die before him or her. The spouse's annuity can be reduced on the intents death, usually by either 33.3% or 50% Guarantee Periods Annuities can be guaranteed for a specified period usually 5 or 10 yearsN The annuity payments will be made for that period, even if the annuitant dies CPA Rates: Joint Life 274 CPA Men CPA Women CPA Joint PLA Rapes
P271 CEEFAX 271 Sun 9 Apr 02:31/01   4/7  ANNUITIES   Escalating Annuities (EA) Annuities can increase by a fixed pdrcentage, normally 3% or 5% or in line with the retail prices indexN On average an annuity increasing by 5% compounded per year will give a starting income 30% less than a level annuityN Normally the EA will overtake the level annuity after about 10 ydars. Although expensive in the short term escalation does protect annuity payments from the effects of future inflation  CPA Men CPA Women CPA Joint PLA Rates
P271 CEEFAX 271 Sun 9 Apr 02:35/02   5/7  ANNUITIES   Frequency of Payment Most annuities are quoted monthlyN By convention CPAs are quoted in advance and PLAs in arrearsN Advance: Payment is made at the beginning of the periodN Arrears: At the end of the periodN Payments can also be made annually, half yearly or quarterlyN Annually in arrears will give the highest payment, but, quarterly in arrears is the most common alternative to monthly paymentsN  CPA Men CPA Women CPA Joint PLA Rates
P271 CEEFAX 271 Sun 9 Apr 02:33/07   6/7  ANNUITIES   Taxation Compulsory Purchase Annuities are taxed as earned income and are usually paid net of basic rate tax. Purchased Life AnnuitiesN Each payment includes a repayment as part of the original capital, known as the capital contentN This is deducted from the gross annuity before applying your tax rateN Thus PLAs have a significant tax advantage because tax is paid only on a small amount of each paymentN  CPA Men CPA Women CPA Joint PLA Rates
P271 CEEFAX 271 Sun 9 Apr 02:36/11   7/7  ANNUITIES   The annuity tables on pages 272-5 show the top paying companies for a purchase price of £10,000N Higher purchase prices will give a slightly higher rateN Rates will also be affected by exact age and choice of benefits. There are companies which offer good rates but are only available to specific groupsN These are not quoted, eg, The Royal National Pension Fund for NursesN CPA Annuity Rates: Male 272 CPA Annuity Rates: Female 273 CPA Joint Life Rates 274 Purchased Life Annuities 275 CPA Men CPA Women CPA Joint PLA Rates