How the Purchased Life Annuity works

Our Purchased Life Annuity offers your clients a guaranteed income for life, in exchange for a lump sum of money that is not from their pension fund. Instead, they would use monies from other sources such as savings accounts, ISAs, or even the tax free cash that may have been taken from their pension.

Your client’s health and lifestyle would be taken into consideration when calculating the amount of income that is paid, which means they could potentially get a higher level of income compared to a Purchased Life Annuity based on a healthy life. 

The Purchased Life Annuity includes options for escalation between 1% and 10% or can be linked to RPI. It also has the option to provide a dependant's benefit up to 100%, and can also offer a guaranteed period from between 1 to 10 years.

A Purchased Life Annuity contains two elements, known as ‘capital’ and ‘interest’. When you receive the illustration you will notice the income figure is detailed using these two elements. This is because part of the income is deemed to be a ‘return of capital’ which is not subject to Income Tax, and the rest of the income payment is ‘interest’ which is subject to Income Tax. Tax rates are subject to change and the amount paid will depend on the individual’s circumstances.

Please refer to the Purchased Life Annuity Key Features document for further information