Income paid in advance or in arrears
Payments can be made either in advance or
arrears. If you opt for monthly income and purchase your annuity on 1st July
and you receive your payment on that day, you are being paid in advance. If
your first payment is not made until 1st August, you are being paid in arrears.
Generally people opt for monthly in arrears
because the slight increase in lifetime income is favoured over the slight
increase in speed of payment, which in practice is less than one month, as the
annuity provider must take receipt of your pension fund monies before they can
make payment.
Indicative cost Comparison
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually in advance
(the most expensive)
|
|
|
|
Figures
based on male aged 65, single life, no escalation and no guarantee period.
Source: The Annuity Bureau –April 2008