Anybody looking to invest in an annuity, be it an index linked annuity or otherwise, would be well advised to shop around before choosing which annuity company to place his or her investment with.
The market is a thriving and busy area, and there are many hundreds of annuity companies to choose from, so how does one go about such an arduous and ultimately important task?
How to choose
Firstly, it is important that you know which type of annuity you require, what you expect to gain from the investment, and when.
In many cases, those with private pensions will be contacted by their pension supplier once their pension kicks into action, or matures. It is always a worthy consideration to take out an annuity at this point – especially if one has retired earlier than the set age – as investing some of that pension can provide an ongoing extra income in later years.
However, it is also important not to simply tick the ‘yes’ box on your pension providers’ mail, as they may not be the best available annuity for you.
A quick search on an Internet search engine will produce a list of many providers of annuities, and you should peruse these to look for deals that suit you.
Do you want a guarantee, or to take a potentially higher paying option that carries more risk?
Some annuity companies will offer you an agreement that promises a guaranteed payment at a certain percentage, yet you could –potentially – earn more elsewhere, with different types of guarantee. Look for an indication of the ‘floor’ level – this is the lowest repayment that you can take from any annuity, and it is effectively the guarantee of the minimum return you will get from your investment.
Who to ask?
There are many advisors on the subject of annuity policies to be found, and again a search through a web engine should provide you with a good choice.
Perhaps better is to ask around friends and family, those who may recently have entered into an annuity arrangement, and speak to the advisor who helped them on their way to a successful deal.
Look, also, for names that you know, as these will most likely be organizations that have been trading in the annuity marketplace for along time.
Look for well-known insurance companies and banks that have insurance divisions, and make sure you investigate every possible option before making any kind of commitment to one single supplier. Make sure the annuity company is rated AA or better by Standard and Poors if you want to have an annuity company that can weather difficult economies.
Done properly and with thorough investigation, securing an annuity policy should be a way to ensure an income for your later years.
There are, as with all such things, some downsides to look out for. Pay attention to small print about fees and surrender charges – these can be levied if a policy is matured early – and to annual rate resets that mean the interest on the account starts again at the beginning of each year, and make sure – above all – that you fully understand every aspect of the agreement you are about to enter into. Read the annuity contract.