Annuities are income paid by the insurance company in exchange for a capital sum for a specific time period. If you want to have regular income during retirement, you can purchase an annuity with your pension fund, which is risk free or if you have a lump sum amount and you wish to have a fixed income for a time period, choosing an annuity plan will be a perfect choice.

Types of Annuities and Annuity Rates

There are different kinds of annuities including annuities payable for lifetime as Pension Annuities or a specific time period for five to ten years, which is suitable for non-pension or for investment purposes. These types of annuity plans work similarly. However, the annuity rates depend on your age, your preference to a level income or the income that increases year after year, period of payment and current interest rates. Whether you are a female or male and relying on the type of annuity chosen, you may have a bearing in the payable level of income.

Standard and Impaired Life Annuities

Impaired annuities are becoming increasingly popular. People having decreased life expectancy with health issues, obesity etc has more favourable annuity rates than people leading a standard life. Some companies even offer better rates to the areas where there is less life expectancy.

Tax

Annuity Plans pertaining to pension schemes will be taxed as earned income and will be added with your liability to income tax. You can make significant plans, since annuities are not subjected to inheritance tax or capital gains tax either.

Finally, make sure you inform your adviser to which of the above category you belong to and achieve maximum income.