There is always a huge difference between the lowest and the highest annuity rates and it is important that you shop around before buying annuities. In the UK, a large number of people are still sticking with their pension providers and do not consider the other options they have through which they can get a much better annuity rate. This is because of the fact that a large number of people are not aware of what annuity is. Most of them don’t know how annuity works. In this article, I have put together some of the frequently asked questions about annuities to help people understand this term better.

There are different types of annuities available and the vast majority of these pay a risk free income which is guaranteed for life. The provider will keep paying the policy holder for the years that the policy holder is expected to live. The amount that an individual receives depends on a number of factors such as age, gender, pension fund size, state of health and other circumstances.

What are the different types of annuities? There are a number of different types of annuities. These include single or multiple premium annuity, deferred or immediate annuity, fixed annuity and variable annuity.

Why compare providers? – There are a number of reasons for comparing annuity providers and one of the major reasons is to get the best annuity rate available. Different providers offer different rates and it is always important to look for the one which offers the best rate as it can increase your retirement income by as much as 40 percent.

Obtaining a quote – one of the best ways to obtain annuity quotes is by seeking the help of an annuity specialist. They will search for providers who offer highly competitive quotes for you. This way you will save yourself from doing the hard work of consulting different providers and you will be getting the best quote available on the market.

However, there are certain annuity products available on the market which is more flexible. An example is a fixed term annuity that will last for five years. Your risk appetite can be changed with certain investment-linked annuity products.

Are Annuities Necessary? Until the 6th of April, 2011, people were forced to purchase annuity products with their pension by the time they reached 75 years of age. However, there are new rules which have been enforced which allows some people to avoid annuities altogether.

Who is a beneficiary? The person who is designated to receive benefits proceeds in case the annuitant dies. The beneficiary will be named when the policy is taken out and it can be changed at anytime upon request by the policy holder. What does the term payout phase mean? The payout phase is the period when you can receive regular payments. The payments are usually based on the contract’s value the time when the option was elected. Guarantees on income are supported by the claims-paying capacity of the insurance company.

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