Annuities in Ireland
An annuity is a contract between you and a life insurance company. In return for a lump sum, the life insurance company will guarantee to pay you a fixed income for life, no matter how long you live. On your retirement, you would typically buy an annuity with a lump sum you have built up over your working life through your pension arrangement.
What are the advantages and disadvantages of an annuity?
With so many different plans and options available we all need some guidance making the correct decision. There is plenty of advice available at Quigley Financial Brokers with the help of a Qualified Financial Advisor (QFA), to see which option might be more suitable for you at retirement. There is no right or wrong answer as to which option is better - just which one is better for you.
Certainty of income in retirement.
The annuity will provide a predictable level of retirement income for life.
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Longevity Insurance
The annuity provides payments for as long as the individual lives, but there is a risk that the individual may pass away before receiving the full amount of the capital sum invested. In such cases, the remaining capital is not paid out, potentially resulting in a loss of part of the original investment.
Simplicity Benefit but Timing Risk
Once an annuity is purchased, no further investment advice is needed, and the payments are fixed for life. However, the annuity rate is determined by government bond yields at the time of purchase, meaning if yields are low, the individual could lock in a lower payout. Even if bond rates rise later, the individual cannot adjust the annuity to benefit from the higher rates.
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What Difference Will Good Financial Advice Make?
* The Value of Financial Advice, 2016 PIBA / Standard Life
**Econometrics Models on the value of advice of a financial advisor, July 2016 Canada Cirano
