How do I purchase an annuity?


Annuity rates are at historic lows right now, so they do represent very poor value for money. People purchase annuities because they don't want any investment risk on their money once they retire. They are content to know that no matter how long they live, they will receive a guaranteed income for the rest of their lives. With annuities, people always look at the "if I die early" scenario but not at the "if I live to long" one. If you live to be 100 years of age, you will still get your guaranteed payment. If markets crash like they did in 2008, it is no concern of yours as you have your guaranteed income and the insurance company has invested in low risk assets so the chances of a default are slim.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 

For the self directed ARF provider I use, the trades are placed immediately.

Who offers the better service? It depends on what you want. Insurance companies tend to be more expensive, but the do have a range of different contract structures, some cheap and others expensive. The more expensive ones are where advisors take high initial commissions.

Stockbroker or self directed accounts tend to have one charging structure that is more transparent. As there are no commission fees to be recouped, the fees are lower.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
For the self directed ARF provider I use, the trades are placed immediately.
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That's good. Are all shares eligible to be included in ARFs? Are dividends reinvested or can the individual have the dividends paid out immediately?
How do you take money out of an ARF?
 
Most listed shares are eligible. You decide on whether to reinvest or take the income. You instruct your provider to make a withdrawal. All withdrawals are subject to income tax under PAYE.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Thanks Steven. I read this online from the Irish Life webpage. "One of the rules governing ARFs is that tax, Universal Social Charge and PRSI, if applicable, must be deducted as if income were taken, even if no income is taken in a particular tax year".

Even if I don't make a withdrawal, the above seems to suggest that I will be taxed anyway? Is it the whole amount that is taxed?

Must I take a minimum of 4% each year and is there any maximum that I can take?

If I purchase individual shares, must the dividends be reinvested back in to the ARF. In other words can the dividends be paid directly to me without going in to the ARF?

Finally. Could I close my ARF in year two and would there be any benefit in doing this?
 
Is it correct to say that you can take the investment GROWTH plus 4% from the ARF every year? Does this include dividends plus profits made from individual shares?
 
You can take whatever you want from an ARF.

There is imputed distribution where you can take 4% of the value of the fund each year. If you don't, the Revenue will take their tax on the value of that 4% anyway. If you have an AMRF, you are allowed draw down 4% if you want but that is optional. It is not subject to imputed distribution.

It is the value of the fund at the end of the year. If you have taken dividends throughout the year, this will be taken off the 4%. Most people invest in funds which re-invest the dividends anyway.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
If you have taken dividends throughout the year, this will be taken off the 4%
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So it looks as if there are funds that will allow you to take the specific dividends each year but from the above comment by Steven it suggests that if you have an AMRF this is counted as part of the 4%?

I was thinking of picking a basket of shares with high yielding dividends. I would choose the shares myself. Is this a good idea or is there any specific fund that invests in high yielding "safe" shares. What I mean by safe are shares in the established Pharma and Utilities sectors.
 
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