Impaired Annuity

Do you have a Personal Pension Plan or a lump sum that you wish to use to purchase an Annuity.

Your Pension Policy is used to buy an Annuity, which is a guaranteed Income for life.

What you need to know

  • You can use one or all of your pension plans to purchase an annuity.
  • You can set the annuity up to best suit your personal situation as there are many additional benefits that can be added into it.
  • The maximum Tax Free Cash that you can have is 25% of the starting fund or collective fund value.
  • Once you purchase an annuity it cannot be changed in the future.
  • Income is guaranteed for your lifetime.
  • If you are risk adverse then an annuity may suit you better than a drawdown.
  • There is no investment risk with an annuity.
  • If you smoke or have significant health issues you may get an impaired rate which means a higher income.
  • An Impaired Annuity looks specifically at your illness(s) and is assessed individually and a rate is decided upon based on your current health.
  • Obtaining an Impaired Annuity Rate could mean that your condition(s) reduce(s) your potential lifespan and so the merits of a Drawdown could also be visited in the process.
  • If you set up a joint life annuity e.g. for your spouse or partner on your death once both of you have passed away the annuity provider retains the fund balance used to purchase the annuity in mostly all cases.

Speak to someone today

If you would like to speak to someone directly today,
please give Howard a call.

Available Monday - Friday 9am to 6pm

Our Transparent Process


Obtain your Signed Permission

Pensions are complicated and in our 32 years of experience need two face to face meetings at your home.

The first meeting so you know who you are dealing with, how we operate and to discuss what you have pension wise. We will run through our process and complete all of our initial paperwork at that meeting. We will also obtain all necessary permissions from you to get all the information and paperwork we require from each scheme concerned.

Agreement / Paperwork

Following the initial meeting we will contact all of your pension providers and obtain the necessary information and paperwork we require. Upon receipt we will prepare the necessary reports, receiving scheme paperwork if applicable and suitability report for our advice prior to our second meeting.

Second Meeting

At the second meeting we will run through each of your schemes and our findings and the reason to transfer or not as the case may be and complete the necessary paperwork to complete the process. Following this we will prepare and submit all applications as necessary from our office and follow this through to a conclusion keeping you up to date as we go.

Ongoing Review

Following completion of the process as there is no investment element and the income is guaranteed there is no need for an ongoing review process by us.

Be advised that we do not cold call, we do not mail shot, we do not pester people, we do not force people to make decisions they do not want to. Everyone who we see is as a result on an enquiry led by them, meaning that the potential client has made the decision to look at and in most cases transfer their Final Salary Scheme or Personal Pension, or SIPP into a new arrangement be this a new Personal Pension or Annuity or Flexi Access Drawdown arrangement. Whilst we are not order takers, the point of this declaration is that we do not force or push people into making such decisions. We still go through a lengthy advice process to check viability, attitude to risk, product and fund selection and point out all of the pitfalls and benefits either way. In some cases we do not agree and this is pointed out to clients. We do not transact insistent client business.

Contact us to discuss your finances

We specialise in all aspects of personal finance and will personally call you back to discuss your requirements and help you make the best choices for your individual circumstances.

No hidden fees. No pressure sales. Let's secure your future together.

Covid-19 Update - We can now offer remote meetings and electronic signatures. Please choose this option in the form. We can still offer in person meetings if required.

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Funding your Annuity plan

  • When setting up a new Annuity plan the existing money in your current pension plan(s) is used to fund it. The source of these funds can be from a single personal pension that you have or from multiple personal pensions that you have and or as a transfer in from a previously held final salary scheme.
  • A Final Salary Scheme has a built in Spouse's Benefit. If you are single there is little point in having this so a comparison Annuity on a single life basis would be an option worth checking out.
  • It is very worthwhile looking at all of your different pension pots and seeing if it is beneficial to combine all of them or some of them.

Some reasons you should use us to transfer your pension(s).

  • Very Competitive Transfer Fee Structure
  • Access to our initial advice and ongoing advice review process
  • Only the best product providers used
  • Flexibility of product and fund selection
  • Extensive Industry Experience
  • We are totally Independent, Directly Authorised Advisers.
  • We are friendly and talk plain English and no waffle.
  • No pressure selling from us.

Why look at an Annuity?

There are many different versions of an annuity available. This section assumes that you are in good health and wish to look at purchasing a Lifetime Annuity.

An Annuity was the only choice available until the advent of Pension Drawdown Plans now known as Flexi Access Drawdown and the subsequent Pension Freedoms recently introduced. Annuities still have their place for people who are risk adverse or simply want absolute guarantees of income with no risk.

If you have multiple pension plans you do not need to use them all to buy an annuity if you prefer some guarantees and some flexibility then an Annuity and a Flexi Access Drawdown combination may be suited. This is all based on individual requirements. We can help you with this.

How do Annuities work?

Your Pension policy is used to buy an Annuity, which is a guaranteed income for life.

If funds are from a Personal Pension you can have 25% as Tax Free Cash and the remaining 75% of the fund value used to buy the Annuity. Likewise if the fund is from a Final Salary based scheme the Tax Free Cash is 25% of the total transfer value and the balance to be used to purchase an annuity. If you do not want the Tax free Cash then you can opt out of that and use 100% of the fund to purchase the Annuity. The benefit is that you will receive a higher income, the pitfall being more tax payable so in general people more often than not take the Tax Free Cash. (Note this is a one off decision and there is no changing it afterwards). (if it is non pension money then there is no Tax free Cash available)

If you are in good health but your spouse is not then it may also be worth investigating Impaired or enhanced annuity purchase. Certainly if you are a smoker then you need to look at enhanced annuity purchase.

All insurance companies tend to quote a Level income that dies (stops) when you do with no spouses benefits as this gives the highest figure. As there are quite a few annuity options available it is best to look into these much further rather than accept the figure quoted initially as this may be completely wrong for your needs. Needless to say the more features (benefits) you purchase the less you will receive each month.

You are not obliged to use the insurance company with whom your pension policy is with although we would always get a quote for them. Some insurance companies like having their pension business but do not want the ongoing annuity business and as such give poor quotes so one has to shop around for the best deal.

With an Annuity you have to decide what you want at the outset and it cannot be changed once it has been started. The more options you buy the less initial income you will get.

For a married couple a typical Annuity would be Level with a 50% Spouses Benefit and a 5 or 10 year guarantee. Now this will pay less than a level Annuity that dies when you do because you are asking for more benefits. So this one will pay a guaranteed amount for the 5 or 10 year guarantee depending upon what you have chosen. This Guarantee means that if you are alive for the whole 5 or 10 years it will pay as normal and beyond for the rest of your life. If you live beyond the guarantee then it will no longer have that benefit. The Guarantee means that if you died on day one or any time during the Guarantee Period the full amount will be paid until the end of the guarantee period. If you have a 50% Spouses benefit then your spouse will get 50% of your annuity income after you die for the rest of her life. So if you died in the guarantee period your spouse will continue to receive the full annuity income until the end of the guarantee period and then it will reduce by 50%. Your Spouse can now upon your death within the Guarantee Period surrender the income as a cash lump sum from the remainder of the guarantee period as long as it is no more than £30,000 and receive the 50% spouses payment right away which may well be more beneficial to your spouse. If, however you died after the guarantee period then your spouse will then receive 50% of the annuity income for the rest of her life right away. If your spouse pre deceases you then on your death if in the guarantee period then full payment will continue to your estate until the end of the guarantee then stop. If your death is after the guarantee period and your spouse has pre deceased you then payments will cease.

Couples often look at an increasing Annuity option but are put off because of the impact it has on the initial income available and the timescale it takes to get to breakeven point.

As a starting point a level single life annuity with no guarantee period that dies when you do (meaning stops paying an income) will get you the best deal. The more additions you make the greater the cost so the less you get for your money. Therefore if you include a 10 year guarantee with overlap, a 50% Spouses Pension, an increasing by RPI element the difference that you will receive as an income at outset will be significant, so careful planning is required.

These options are all available for enhanced and impaired annuity purchase too.

Company Scheme Transfer. The reason we mention this is because if you are single then you may get a better deal transferring out of a company scheme which is funded to provide spouses benefits. For reasons mentioned earlier a level annuity may give you a far higher income at the outset. Unless we look at all the figures then you will not know what is best for you.

So how do you get going? Well we need to make enquiries about your current pension or pension policies and obtain company quotes and based on the values we can obtain comparison quotes for you.

What is an Enhanced Annuity ?

This plan takes into lifestyle matters such as smoking for example and as such gives a slightly better annuity rate than an annuity for a non smoker for example.

What is an Impaired Annuinty ?

This is more specialist and takes into account far more medical conditions than an enhanced annuity and is far more specialist and quoted specifically for you so the only way you will get an impaired annuity quote is by applying for one. It may also be a consideration to look at a Flexi Drawdown policy as a comparison because if you receive good impaired terms your health is a considered issue and an annuity will tie up your money and death benefits under a flexi drawdown are more beneficial for anyone you may wish to inherit.

What are the risks?

  • The income from an annuity is guaranteed for your lifetime.
  • Once purchased an annuity cannot be changed surrendered.
  • As a quick guide, the deal or annuity that you receive will depend upon the annuity rate available at the time based on your health and current illnesses, age, sex, habits, where you live, family history, amount of money that you wish to use to purchase the annuity, plus options that you require to be included.
  • Every annuity option that you include reduces the annual amount of income you will receive.
  • If you have a joint life annuity and your spouse partner passes away before you do then upon your death the annuity will cease and the provider will keep the fund.
  • If you have a joint life annuity and you pass away before your spouse partner then upon their death the annuity percentage they receive will cease and the provider will keep the fund.
  • If you pass away too quickly you will get back less than you have paid in as the provider keeps the fund on death.
  • A Capital Protected Annuity may serve to protect the capital less income drawn at the date of death.
  • You cannot in most cases leave the annuity fund to your estate apart from capital protected annuity.