Planning for your loved ones’ future

Later on in life, you’ll want to make sure that both you and your loved ones are financially secure. You want to make sure that, at the very least, you can afford the basics, and, when you eventually pass away, your family is well looked after. Buying an annuity helps enormously with that, although there are a few pitfalls worth avoiding when it comes to choosing death benefits, especially when it comes to payments made to the taxman.  

According to my pension expert, annuities are designed to help provide regular pension payments for anyone who’s saving money from an early age for retirement. Second to buying a first home, it’s one of the most important purchases that a person can make in their lifetime. This is why it’s important to take your time when purchasing one, especially when it comes to choosing one that offers favourable rates and ensures that, if you pass away, the money left goes to the ones you love rather than the exchequer.

To ensure that your annuity is protected from any lowering of rates or any income being unfairly taken in the form of tax, you should think about death benefits. Death benefits mean that any income from your annuity can stay from the moment it’s taken out until you pass away, and even beyond that point.

Funds left in an annuity after death are either vested, where 55% of it will go directly to the taxman. Meanwhile, unvested funds go to the spouse/beneficiary tax-free. When taking out an annuity, make sure that any money remaining post-death is unvested. This will help your loved ones to live more comfortably after you’ve gone and pay for funeral costs and other expenses.