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Purchased Life

Purchased Life

Purchased life annuities are purchased by private investors and payments comprise part taxed interest and part untaxed return of capital.

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There are different types of annuity arrangements that are briefly listed below:

• Level without guarantee
  The income payments provided are the same each year throughout the recipient's life.
• Level guaranteed 5 years
  The income payments are the same each year but are guaranteed to be paid for a minimum of (5) years even if the recipient dies within (5) years. The balance due will be paid to the estate of the recipient.
• Escalating 5% p.a. without guarantee
  The income payments increase each year by (5%) compound but cease immediately on death.
• Joint life last survivor
  On the death of the first life the income passes to the second life or survivor and ceases on the death of the latter.
• With overlap
  If one of the recipients dies within the guaranteed period, the balance of the guaranteed income is paid as a lump sum (sometimes discounted) to the second life who will receive the income from the annuity in his or her own right.
• Deferred Annuity
  These annuities are purchased with a lump sum or series of payments to commence at a future date for a specified term.
• Equity Linked Annuity
  The underlying value of the annuity is unitised enabling the annuitant to withdraw some units each payment period with the balance remaining in the fund going up and down as the fund value varies with market movements.
• Enhanced Pension Annuities
  Some insurers are prepared to pay a higher income than usual, for various categories of people, because they assume the payment period will be shorter than average. Smokers, people with certain health problems and from selected occupations should consider enhanced pension annuities.