The aim of this module is to help you understand what an annuity is and how important it is to shop around for the best deal when you decide to take your benefits from the KPS-MP or KPS-FS AVCs.
Even if you are not ready to retire you will find this module useful as it will give you an idea of what you need to think about and help you plan for the future.
Tax free cash sum required
the amount of your “pot” you want to take as a tax free lump sum. Maximum 25%.
Escalation
You can choose an annuity which goes up every year. This increase can be by a fixed amount or in line with inflation. Inflation can be measured by either RPI (Retail Price Index) or CPI (Consumer Price Index).
Single or Joint Life
With some annuities you can choose to add your partner. Joint life annuities are more expensive than single life so if you choose a joint life annuity you will get a lower income than you would from a single life annuity.
Annuity Term
For an Open Market Option annuity the term will be For Life.
Guaranteed Period
this is the period you can have income payments guaranteed for after you start the annuity. You can choose 0, 5 or 10 Years. You might choose to have your payments guaranteed if you are concerned about your health and life expectancy. The longer the guranteed period, the lower the income.
Payment Frequency
This is how often you want the income paid. Generally this can be monthly, quarterly, half yearly or yearly. Income can be paid in advance (ie at the start of the period) or in arrears (ie at the end of the period). For example, if you choose “monthly in arrears” the first income payment would be one month after you bought the annuity. Make sure you choose the most appropriate method for you because it makes a difference to how much you get. For example the income for a monthly in arrear annuity will be lower than a yearly in arrear annuity.
Without Proportion
No annuity income allowance is offered for the proportion of the month in which you die.
Value Protection
In the event of the annuitant’s death (before age 75), value protection will return the original amount used to buy the annuity, less all annuity payments. Tax at 55% is also deducted from this amount. You can protect any part of the pension fund up to 100%.
Commencement Date
If you haven’t yet reached your retirement date you may need to adjust your date of birth on the input screen to trick the tool into giving you the figures.
