For those of you who are approaching retirement age it is very important that you consider how you are going to take your retirement benefits. You essentially have two choices after you take your retirement lump sum, you can:
- Invest your pension fund in an Approved Retirement Fund (subject to meeting certain conditions) or
- purchase an annuity with your remaining funds.
An Annuity is a guaranteed payment for life, this type of pension benefit has become less popular in the last 10 years due to falling annuity rates. This has prompted some insurance companies to reevaluate the annuity options they offer to retiring clients.
New Ireland Assurance has recently launched a series of Enhanced Annuity rates to offer certain customers better value annuity rates which may give them an genuine alternative to reinvesting in an ARF.
What is an enhanced annuity?
An enhanced annuity is the same as a standard annuity, except that it takes into account your health status and lifestyle health risks (e.g. smoking) in determining the level of regular income payable to you. With an enhanced annuity you may be entitled to a higher regular income than you would under a standard annuity.
For example a 70 year old smoker who would be entitled to an annuity payment €500 payment per month, would now be entitled to a payment of €554 per month. This is an increase of over 10% in the quoted annuity rate.
If you are approaching retirement it is vitally important that you are aware of all of your retirement options. Although annuity rates may not seem like good value initially, these enhanced annuity rates may make the annuity option the best choice for your personal circumstances.
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