Updated: June 10, 2019

Sole Annuities

A sole annuity is one possible option if you need retirement income just for yourself. Find out if it's the right fit for you in our guide

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 10, 2019

If you think an annuity is the right option for your retirement, rather than drawdown or a combination of both, you may believe your decision making is over. However, a single life annuity is only one of the options potentially available and it isn’t always right for everyone.

We get a lot of enquiries from people interested in annuities but who want more information on their options. For those of you who aren’t sure but think this might be the best use of your pension pot, this article will help you decide.

In it we’ll discuss:

Single life annuity definition: What is a single life annuity?

A single life, or sole annuity, will provide you with an income during retirement. The definition of a single life annuity is that it’s an annuity covering one person.

To give more detail, you purchase a single life annuity with your pensions savings. In the past, people had to buy an annuity to access their pension savings. However, since the recent pensions freedoms were introduced, you no longer have to use all of your pensions savings to purchase one. You can choose to make the purchase with part of your pension, if that’s a better option for you.

Single life annuity calculators

To find out what type of income a single life annuity could provide, you can use a single life annuity calculator. You can find one on the government’s PensionWise website here.

The results from the different figures you use will help you understand whether you might be better off with a single life annuity, rather than a joint annuity, but keep in mind that these tools only offer a rough guide and don’t take your needs and circumstances into account.

Once you buy a single life annuity you cannot change your mind and sell the annuity to use a different pension option. That’s why it’s important to be certain that an annuity is the right option for your retirement.

To find out more about single life annuities including how you can divide up your pension savings to buy one, it can make sense to speak with an experienced advisor, like those we work with.

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How do I know if a single life annuity is right for me?

Understanding if a single life annuity pension is the right option for you requires finding out more about what type of retirement income you would receive and if there are any other options alongside choosing a single-life annuity.

Most people who opt for a single life annuity do so in the knowledge that their partner or spouse has a good pension of their own. It’s also a good option to ensure you receive the best monthly income from your pension savings.

However, there are additional options for your single life annuity, they include selecting:

As the name suggests, a fixed-income single life annuity pays out a fixed income each month during your retirement, until you die. If you live for longer than your life expectancy, it’s possible that you could receive more from your annuity than pension pot amount you used to buy it.

Selecting an increasing income single life annuity will see your monthly income rise over the years from a lower initial amount. This helps to guard against inflation and means your pension doesn’t become less valuable each year as the cost of living continues to rise.

Speak to one of the advisors we work with to compare the difference between a fixed-income and increasing income single life annuity. Seeing how your income changes can be helpful when selecting all the details of your single life annuity pension.

What is a single premium life annuity?

If you’re researching single life annuity pensions, you may come across single premium life annuities. A single-premium life annuities are also known as single payment annuities or an immediate payment annuity.

How do single payment annuities work?

A single premium life annuity allows you to buy an annuity with a single lump sum payment, without the need to pay into it over any period of time. It also begins to pay out your agreed retirement income almost straight away.

Single premium life annuity rates can differ from other individual retirement annuities, but this is something you can check with the help of a pensions annuity advisor.

It’s important to know, though, that if you buy a single premium life annuity pension, that although the benefits can be quick, if you decide at a later date that it wasn’t the right option for you and that you’d prefer to exit your annuity, you will face high charges and a percentage of your pension savings that you used to buy the single premium life annuity will likely be kept by the provider. Providers usually only allow you to cash in an annuity if its value is under £10K.

In some cases that percentage can change depending on how long after you began receiving your income you decide on a different option. It’s important to always read all the terms of any annuity or annuities you buy with your retirement income. Or, if you’re unsure as to what’s important to consider when selecting the right annuity or pension for you – it could be helpful to speak with a pensions advisor, experienced in annuities.

Can I pass my single life annuity on after I die?

As we consider retirement, it’s natural to think about our loved ones and how we can help them, even after we die. If you would like to ensure your partner or spouse is provided for financially after you’re no longer here, then if you do opt for a basic single life annuity  – it’s important to know the income from it ends when you die.

That’s why many people opt for a joint annuity or only use part of their pension savings to buy an individual annuity. However, there are ways to ensure your single life annuity payments continue after your death and are made to a named beneficiary.

A single life annuity with a guaranteed period

A single life annuity with a guaranteed period allows you to choose a set number of years for which you will definitely receive an income from your annuity. This means that if you die during that period, your single life annuity income will continue to be paid throughout the guaranteed period, to a named beneficiary.

In theory, the guaranteed period could be as long as you like. However, many annuity and pension providers cap it at 30 years and in many cases, the limit for any guaranteed period is five to ten years.

If you choose to buy a guaranteed single-life annuity, it’s important to know that your regular income payments will be lower than they would if you didn’t select a set period for guaranteed payments. It is also important to know that in most cases, the income that your named beneficiary receives after your death tends to be lower than the one you received.

However, it can provide peace of mind to know that your partner or spouse will receive some benefit from your pension, even after you die.

Value protected single life annuities

Another way to ensure your loved ones benefit from your pension savings and annuity after you die is to opt for a value protected, or capital protected single life annuity. This means that if there is some of the initial capital you invested in your annuity left over after you die, it will be paid to named beneficiaries.

However, how much of your pension is paid out depends on what proportion of your pension you choose to protect.

If you have a pension pot of £100,000 you can choose to protect a proportion of it or all of it, depending on the terms of the annuity. If you die after having only received £30,000 of your annuity and you chose to protect the entire amount, then your beneficiaries will receive the remaining £70,000 in a lump sum, less any fees, charges and costs as per the terms of your annuity.

But, if you only protected a proportion of it, say £50,000, then your beneficiaries would only receive £20,000 upon on your death.

It’s also important to note that if you choose a capital protected single life annuity, then your regular income could be lower than if you opt for a basic single life annuity. In addition, where your partner, spouse or named beneficiaries does receive a lump sum from your pension after you die, the tax treatment of it depends on:

  • Your age when you died.
  • How long after your death the lump sum is claimed.

As you can see, there are a variety of options to consider even after you select a single life annuity pension. But, it can often be the right decision for many people.

Speak with an individual retirement annuity specialist

If you’re interested in buying a single life annuity with your pension but want to find out more, it can help to speak with an expert. They can answer all your questions and help you understand which annuity option is right for you. Call Online Money Advisor today on 0808 189 0463 or make an enquiry here.

Then, just sit back and relax while we do all the hard work of finding the right single life annuity pension advisor for you.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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