A Conventional Annuity/Compulsory Purchase Annuity is a guaranteed income for life. The income available will be determined by your age, health and available rates. Certain features will affect the rates, and are summarized as follows:
• Smoker Status (Smokers Annuity) - a smoker can access an increased rate than that available to non-smoker due to the deemed life expectancy.
• Indexation or Level Income (Inflation proof annuity/Escalating Annuity/Level Annuity) - an indexed annuity starts lower but will increase in line with inflation whereas a level annuity starts higher but remains the same, thereby eroded by inflation and reducing the purchasing power in real terms.
• Guaranteed period - this is the period that income is guaranteed to be paid, which can be to the estate or a surviving Spouse, from inception regardless of whether the annuitant lives for the same period. – does this mean that family members can benefit? What are the implications?
• Spouse’s pension (Single Life Annuity/Joint Life Annuity) - an income of 0%, 33%, 50%, 66% & 100% can be paid for the life of a spouse in the instance that the Annuitant dies first.
• Tax free lump sum - one is allowed to take a tax free lump sum of 25% from the pension fund.
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