Hodge Life Annuities
Do you require an extra income?
A Purchased Life Annuity can provide a guaranteed income, which will remain unaffected by changes in interest rates. As a result you can budget with certainty for the future, in the knowledge that your gross income from the plan will remain constant. In addition, the income that you will receive will usually be greater than that available from savings accounts at Banks and Building Societies, although your capital is retained with the latter investment.
- An inheritance
- A tax-free cash sum from a pension fund
- A redundancy payment
- The sale of a house
- A maturing life policy
- Share encashment
What is a Purchased Life Annuity?
A Purchased Life Annuity uses your cash lump sum to provide a guaranteed gross income throughout your lifetime or over a period of your choice.
You should be aware that at the end of the term selected or when you die, there will be no return of your cash lump sum. In addition, once you have purchased your annuity you cannot alter the arrangements or cash it in.
Our Purchased Life Annuity can be bought for any person above the age of 50 and can be set up as follows:
- Single Life
- Joint Life Last Survivor, when payments will continue after the death of the first annuitant and only stop on the death of the second annuitant.
Please note that income from a joint annuity is usually less than for a single life. Income can be paid either on a monthly or annual basis, in arrears.
It is possible for the income to be based on the life of someone other than the purchaser.
How much can I pay into a Hodge Life annuity?
The minimum purchase price is £5000. There is no maximum purchase price. Please consult your financial adviser to discover how much money you need to invest to produce the income you require for your particular needs.
Will I have to pay tax on my annuity payments?
The gross income payments from your Purchased Life Annuity are regarded for tax purposes as being made up of two separate parts - a capital amount and a taxable amount.
The capital amount of the income payment is set by Inland Revenue rules. This part is regarded as the return of your capital and is not taxed. As a result, you receive the full amount gross of tax.
The taxable amount is regarded as investment income. This interest part of the annuity payment is normally paid by Hodge Life net of savings rate tax. If you are a higher rate taxpayer, you will be liable to pay additional tax direct to the Inland Revenue. If you pay starting rate tax, you may be able to reclaim part of the tax deducted.
To ensure that a part of your income payment is regarded as returned capital, you should complete the Inland Revenue form PLA1 supplied to you when you complete an annuity application.
If you are a non-taxpayer you should complete Inland Revenue form R89, or R86 for joint purchasers (also supplied), to ensure that we are able to pay your annuity income gross.
The Choice of annuities:
There are several different types of purchased Life Annuity offered by Hodge Life.
Temporary annuities:
With a temporary annuity an annuitant is able to obtain a fixed income in exchange for a cash lump sum for a set period as agreed at the outset. This period can be set for 5, 6, 7, 8, 9 or 10 years.
A temporary annuity will cease at the end of the period you have chosen, or on the death of the annuitant(s) if earlier. For example if a 10-year annuity is selected and the annuitant dies after 8 years and 10 months, the annuity payments will cease on their death.
Two guarantee options are available with a temporary annuity -
- Nil Guarantee. This plan offers the highest rate of return in exchange for a cash lump sum. Payment ceases on the death of the annuitant.
- Capital Guarantee. If death occurs within the period of the agreement, Hodge Life will pay a lump sum equivalent to the shortfall between the gross payments already made and the purchase price.
Lifetime annuities:
With a Lifetime annuity an annuitant is able to obtain a fixed income for life in exchange for a cash lump sum.
Various guarantee options are available with a Lifetime annuity which include -
- Nil Guarantee. This plan offers the highest rate of return in exchange for a cash lump sum. Payment ceases on the death of the annuitant.
- Capital Guarantee. When death occurs, Hodge Life will pay a lump sum equivalent to the shortfall between the gross payments already made and the purchase price.
- Guaranteed Annuity - This plan offers a guarantee period of either 5 or 10 years from the initial income payment. If death of the annuitant occurs during the guarantee period specified, a discounted lump sum payment will be made on completion of formalities.