An annuity is a contract issued by an insurance company that returns payments of capital and interest to the holder on a regular basis. The payouts can be fixed or increasing amounts for a set period of time or for the annuitant's lifetime. Annuities have no rescission rights; once you purchase an annuity you cannot amend or terminate the contract.
Term Certain Annuities
These annuities run for a specified period of time, for example 5, 10 or 20 years, or until a certain age of the annuitant has been reached.
Life Annuities
Life annuities, as the name suggests, exist for the lifetime of the holder. The annuity payment varies with the age of the annuitant, and type of life annuity. The older one is when the annuity is taken out, the larger the income over the shortened life expectancy. A life annuity may be a joint and last survivor annuity, where the income goes to one annuitant until death and then the survivor until death. Since two people combined have longer life expectancy than one, the amount of annual annuity income is lower.
A life annuity may have a minimum guaranteed period. If the annuitant dies beforehand, the payments would continue up to the completion of the period. If death occurs after the guaranteed period has expired, the insurance company pays nothing more.
Annuitants living beyond the average life expectancy receive more than those who do not, thus annuities are described as protection for the risk of living too long. Those with life-threatening health problems, significantly shortening life expectancy, may be eligible for annuities with more generous payments.
Registered Annuities
You can purchase an annuity with funds that come from registered retirement savings plans, registered pension plans and deferred profit sharing plans. Pension regulations will require the use of ?unisex? mortality rates and usually a joint and survivor annuity with a 60% guarantee to the survivor. The Income Tax Act includes the full amount of each payment from a registered annuity in the annuitant's taxable income, and may allow tax credits.
Non-Prescribed Annuities
With a non-prescribed annuity, only the interest income and not the portion attributable to return of capital, is taxable. The interest portion will be larger in the initial years and smaller over time.
Prescribed Annuities
A prescribed annuity contract (PAC) receives special tax treatment under the Income Tax Act. {(See 12.2ITA reference 12.2 ).} The taxable amount is lower than a non-prescribed annuity in the early years and higher in later years. There is no tax on the return of capital, but the interest that is included in the annuitant's income is level throughout the term of the annuity. Given the time-value of money, this tax treatment is more favourable to the annuitant than is the taxation of a non-prescribed annuity.
Only individuals, not corporations or partnerships, may own a PAC. The policy owner must be the annuitant, a spouse trust or testamentary trust. Annuity payments must be for equal amounts. If the PAC is a joint and last survivor contract, the annuitants must be spouses or siblings of each other. Age plus any guarantee period cannot exceed 91. The annuitant cannot surrender or commute the annuity, except on death.
Deferred and Immediate Annuities
With a deferred annuity, contributions accumulate over a specified period, the interest upon which is taxable during the accumulation. The annuity payments start at maturity. Immediate annuity contracts have no accumulation period. The purchaser pays a lump sum and receives annuity payments immediately.
Many people do not save money for the rainy days ahead. In a recent survey from National Savings & Investments (NS&I), it was found that 55 percent of people do not have any financial plan for the future. There was also a gender bias involved in financial planning. NS&I, the financial services firm, found that women were more likely than men not to have planned their financial future. Two-third of the women as compared to half of the men made no financial arrangements for their future.
The most interesting aspect of the survey was that only 11 per cent of people were found to have a detailed strategy for handling their money. Around one-third of Brits said that they do not worry about their personal finance problems because they expect to either earn more money in the future or receive a windfall of some kind or be able to borrow whenever the need arises.
Personal loans are the most dependable option when it comes to an easy and quick financing. The 'me now, debt later' attitude of the Brits sometimes spells financial trouble for them. Although a careful and meticulous planning is not a guarantee against any financial hiccup, but still it can do wonders in alleviating needless financial troubles.
Quick personal loans are very much popular in the UK. A resident in UK can get up to £25,000 without providing any security. The repayment period may be from six months to 8 years depending upon the lender’s policy and your individual circumstances. The interest rate on such loans starts from seven per cent and may increase with every adverse condition of the borrower.
You can take out personal loans by applying online. The online process is not only easy but time-saving also. Besides, you get several loan deals from the lenders to choose from.
Both Galen Weston & Amenda Dorothy are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Galen Weston has sinced written about articles on various topics from Life Insurance Annuity, Investing and Trading and Mortgage. ProfessionalReferrals is an on-line provider of high-quality referrals to professionals within the Financial Services industry. We operate an on-line library of articles and information designed to provide a consumers' guide to the financial services mark. Galen Weston's top article generates over 6600 views. to your Favourites.
Amenda Dorothy has sinced written about articles on various topics from Debts Loans, Bad Credit Loans and Debts Loans. About The Author: The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting. Amenda Dorothy's top article generates over 90500 views. to your Favourites.