Income from a 300000 annuity

Answer 1

I think that you mean income from a 300,000 capital lump sum. Correct? An annuity is when your capital is used to buy an income for life. There are two forms of annuity, purchased and compulsary. Purchased means you take your savings and buy an income for the rest of your life. A compulsary annuity is when your savings have been accrued in a tax exempt pension sceme and therefore you have NO CHOICE about buy an annuity with them.

Okay, whatever the type of annuity, you get the choice of what type of annuity you buy as follows:-

(1) Straightforward annuity. No guarantee. When you die, the income ceases.

(2) Guaranteed annuity. The income would be paid for 5 or 10 years whether you were alive or dead. If the latter, it would be paid to your estate for the residual period of the guarantee.

(3) Joint life annuity. If you are married and were to die first, the income would be paid to your wife until she died.

(4) Indexed linked annuity. The income would be increased at a maximum of 5% per year to offset increases to the cost of living.

Note that each time you add sophistication to your choice of annuity, the start level of the annuity would be lower.

Also note that annuity rates fluctuate in line with bank interest rates. You should shop around to find the highest annuity payer as rates differ between different insurance companies.