In simplest terms an annuity is an agreement to pay out a regular sum in return for a one-off investment. For example, if you could gave me 100GBP I could agree to give you back 10GBP a year for a set number of years.
In practice, annuities are a little like a ‘reverse life insurance’ policy and act as a way for you to release the value in your pension fund when you retire.
You spend your working life building up a nice fat pension pot. When you retire you hand that over to an insurance company by purchasing an annuity. In return the company selling the annuity agrees to pay out a set percentage of that amount each year for the rest of your lifetime (lifetime annuity). At the end of your lifetime whatever is left over is pocketed by the insurance company.
So, if you bought an annuity for 500,000GPB at 7%, then the provider would then have to pay out 35,000GPB a year for either an agreed number of years or until you pass away – in effect, giving you a regular income of 35k for life.
The longer you live the more you get.
You Don’t Have to Buy Your Annuity from Your Pension Provider
Many people are under the mistaken impression that they have to buy their annuity from the company that provides their pension – you don’t. Just like any other insurance product you can, and should, shop around to find yourself the best annuity rates available. If you make a mistake or enter into an annuity blindly you could be unnecessarily reducing your annual income in retirement – for the rest of your life.
It’s also worth bearing in mind that you can personalise your annuity to suit your own personal income requirements. For example, you may choose to have the amount paid out increase with inflation – especially useful if you plan on enjoying a good long retirement – or run for a maximum or minimum number of years.
Of course they still need to make money so the amount you are paid annually will be based on factors such as age, sex and the current bond rates (i.e. how much they can earn from investments). It might not sound nice but the insurance company ‘wins’ if you die sooner rather than later so an annuity bought at 60 years old will almost certainly pay out less per year than one bought at 70.
Is your annuity the most important financial question of your retirement?
It could be, yes.
Annuities are certainly one of the most secure ways for you to provide yourself with a guaranteed income for life. However, once an annuity is purchased it cannot be moved or changed in any way. With that in mind, it’s vital that you choose the annuity that best suits your needs.
In other words you need to get annuity advice to get the best annuity rates.
Shop around, get expert advice and speak to an independent financial adviser – but whatever you do, don’t just take the first annuity that’s put in front of you by your pension provider. Whatever you choose, you’re going to have to live with it.
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James Warden chest tomb, Charmouth churchyard
Image by Stoutcob
The inscription reads:
JAMES WARDEN Esq
Who fell in a Duel the 28th
In the 56th year of his age.
‘In 1783 on the death of Francis Phipps Henvill, the Manor of Charmouth was purchased by Lieut. James Warden R.N…
It is a puzzle how James Warden was able to afford Charmouth and also Langmoor Manor where he resided. It has been conjectured that it was from prize money for the nineteen Sea Battles he fought in. But the Will for his wife shows them owning considerable property at Wapping, near London.
He quarrelled with his son, whom he disinherited, and in his will left the Estate to his wife and upon her decease, upon trust, out of the rents and profits they were to pay to his son, William Weeks Wharton, £20 a year during his life by 4 evenly quarterly payments. But in case he should at any time sell, dispose of, or make away with or borrow money upon the said annuity. Then declared the bequest therof should be deemed void. The trust money was derived from Charmouth House property and other houses. It is interesting to see that the son was to live a long life and is still shown as living in his house in Charmouth when the Manor of Charmouth comes up for auction in 1854.
In 1789 James won an action against the Rev. Brian Combe and others for removing sand and seaweed from the beach.
His arguments climaxed with a disagreement with a neighbour, Norman Bond that resulted in a duel at Hunter’s Lodge Inn with James being shot through the heart and the neighbour fleeing the country to Barbados. The episode is recorded on the large tabletop tomb near the entrance to Charmouth Church. His Wife, Elizabeth, was to survive him by 7 years, but not it would seem broken hearted. For a letter turned up where the writer says that:
“Mrs, Warden welcomed and even courted her widowhood. She chose the pistols, thanked the gentleman who had lent them and made no effort to prevent the duel, although she lived close to a magistrate. In short she seemed determined that one of them should fall. If Mr, Bond, that her husband must be hanged, and if the latter, she was fairly rid of him”. She was to lease Langmoor to a Mr Dicken and move to Axminster where she was to spend her last years. ‘
"When Warden and Bond met in the street, an argument ensued in which Warden became extremely abusive and threatened to shoot Bond’s dogs," en.wikipedia.org/wiki/James_Warden
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