Frequently Asked Questions

What is an annuity?

An annuity is what many people commonly refer to as a pension. It is a guaranteed income payable by a life assurance company in exchange for lump sum payment from your pension plan at retirement.

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What will effect the rate of annuity payment I get?

  • The amount of money from your retirement fund that you invest in the annuity.
  • If you are male or female.
  • The type of annuity you want - Level or Escalating.
  • Your age when you buy an annuity.
  • Medium to long term interest rates.
  • Whether you add a spouses/dependants pension.

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What are the advantages of Annuities?

  • You get a secure, regular income for life so you know exactly where you stand.
  • You can choose an annuity type that best suits your needs, such as one that gives a part-pension to your dependants after you die.
  • Once you invest in an annuity, you will not need any more investment advice in relation to it.
  • You don't need to worry about investment risk as your income is guaranteed.

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What are the disadvantages of Annuities?

  • Once you take the pension, your income level is fixed or indexed to an agreed amount per year and can't be changed afterwards.
  • If you choose a level pension, or one that does not increase each year, inflation will reduce its value during your retirement.
  • The annuity rate is fixed the day that you buy the annuity, so you won’t benefit from any later increase in annuity rates.
  • If you die early and your annuity income is just for your own lifetime, the money you used to buy the annuity does not go to your dependants. Basically, your annuity dies with you.

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What companies do you compare when I request a quote?

We compare the following companies and the details of each quote will be provided in the Research Report.

  • Zurich
  • Irish Life
  • New Ireland
  • Canada Life
  • Friends First
  • Aviva

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What is the Taxation treatment on Annuities?

Annuities purchased from the proceeds of a pension plan are subject to PAYE income tax. A deduction for the Universal Social Charge may also be made depending upon the level of retirement income and the age of the annuitant.

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What is a guaranteed period?

You can guarantee the annuity income so that it will be paid for a minimum period, even if you die. This is called the ‘guaranteed period’ and can be up to 10 years.

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How often are annuity payments made?

You can arrange for your annuity payments to be paid every month, every three months, every six months or every year depending on the insurer. We quote by default for a monthly payment in advance.

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What is escalation?

Choosing this option will mean your income will increase each year. This helps to protect your income from the effect of inflation. You can choose to have your income increase by 3% or 5% each year. Choosing escalation will increase the cost and therefore lower the intial monthly payment amount.

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What is a Single Life Annuity?

This means an annuity payable on the life of one individual. It comes into payment as soon as it is purchased, and payment ceases when the holder dies.

If you choose this option the annuity income is paid throughout your life only. When you die, the income will cease. The income you will receive each year from a single life annuity will be greater than a joint life annuity. However, please bear in mind that the income will cease on your death.

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What is a joint life annuity?

This is an annuity which depends on more than one life. The most common joint life annuity is one where a continuing pension is paid to a surviving spouse or other named beneficiary following the death of the pensioner.

Joint Life Annuities can be set up as level annuities (i.e. the same amount payable to each person); more commonly, they are set up on the basis that a reduced benefit would be paid to a surviving spouse or dependant. The person to receive the continuing payment after the death of the main pensioner must be identified when the annuity is being bought. If that person does not outlive the pensioner, nothing more is payable.

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Do you have examples of any annuity rates?

As discussed above there are a number of factors which influence the annuity rate. For ease of illustration we have prepared some indicative quotes based on certain criteria (correct as at 25th September 2011)

Age Sex Amount € Guaranteed Period Spouse's Pension Annuity Paid Monthly €
65 Male 100,000 5 years NO 561.30
65 Female 100,000 5 years NO 528.31
65 Male 100,000 5 years 50% 509.51
65 Female 100,000 5 years 50% 495.45
65 Male 100,000 10 years NO 548.50
65 Female 100,000 10 years NO 521.91
65 Male 100,000 10 years 50% 503.93
65 Female 100,000 10 years 50% 492.41

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