Purchased Life Annuity

For when you want a guaranteed tax-efficient income

There can be occasions when your priority is to generate a tax-efficient guaranteed income. This could be where you want to help fund school or education fees for children or grandchildren, supplement pension income in retirement or helping to reduce the value of your estate for inheritance tax purposes.

Such circumstances could be where a Purchased Life Annuity is a valuable option. It allows you to pay a lump sum and in return receive a guaranteed income payable for a specific term or for the rest of your life.

For tax purposes, part of the income payable is treated as a return of capital and therefore this could provide a higher net income than you could get from other comparable investments such as a bank or building society account. The income that you receive will be set at outset and will not fluctuate, although you could include an indexation if you want to see the amount your receive increase over the payment period, perhaps to cover the risk of inflation or any increasing income requirements.

A guaranteed payment period can also be included so that in the event of you dying in the early years a lump sum is payable, returning the balance of the capital payment. A minimum payment period could mean that the income continues even after you die.

  • Part of the income you receive will be treated as a return of capital and therefore will not be taxable. The amount will depend on your life expectancy, so will increase the older you are.
  • The income payable is fixed at outset and will not change, although it is possible to include an indexation so that the payments increase by a fixed amount of up to 10% each year.
  • The payments you receive can be structured to pay monthly, quarterly, half yearly, yearly or termly – three times a year, to coincide with school fees planning.
  • If two people apply for a joint annuity, such as spouses or civil partners, an income can continue to be paid until the second death, providing security. This continuing income could be reduced, meaning that a higher amount is payable when both are alive, reducing to reflect a possible drop in expenditure.

The Purchased Life Annuity may be suitable for you if:

  • You have a lump sum of cash that you would like to use to generate a guaranteed income, either over your lifetime or a fixed term
  • You have utilised your pensions Lifetime Allowance and want to supplement your retirement income
  • You would like to provide an income for a beneficiary
  • You are at least 35 years old

The Purchased Life Annuity may not be appropriate if:

  • You want all of your funds to be accessible immediately
  • You are looking for a flexible return and do not need a guaranteed income
  • You have less than £10,000 to invest
  • You want to make regular or one off contributions
  • You want to withdraw all of your funds immediately in one go.

You should speak to a professional adviser to ensure that any investment is suitable for you.

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised and regulated by the Financial Conduct Authority.