Quick Glance at How a Pension Annuity Calculator Works
Retirees that are about to exchange their pension pot for their retirement income would be well advised to use a pension annuity calculator to help them figure out how much income they will get. A pension annuity calculator is a simple piece of software that quickly displays the annuity rate that an individual might get for a certain size of pension fund given the options they require.
Retirement planning is a confusing time for many retirees, it is not something they do every day, it is a once in a lifetime event. There are many options that can be selected and you need a way to figure out what each might cost you, this is where the pension annuity calculator can help. To use the calculator you need to enter all your personal details such as name, address, postcode, date of birth, if you are married your spouse date of birth, the amount of pension fund you have to purchase an annuity. This information is the fixed information that will not change, you then need to consider the options you wish to purchase with your pension fund. The option choices are:
Single or joint life – you need to make a decision on whether you need an income for a spouse or partner in the event of your death.
Level or escalating income – you will get a higher income from a level pension but its purchasing power in 15 or 20 years will be much less than when it starts
Guaranteed payment period – choice of none, 5 or 10 years
Payment frequency – do you want your income paid monthly, quarterly or annually, also do you want it in advance or in arrears. You will get more income if you choose arrears but will have to wait longer for the first payment.
These are the main options and the pension annuity calculator will allow you to select and deselect the options to see how it affects the retirement income you will receive. This way, you can decide if the options you wish to include will be value for money or not.