Retirement
Purchased Life Annuity
A lifetime income bought with capital that is not pension money — an inheritance, a property sale, a settlement — with part of each payment treated as return of capital.
Ladies View, Co. Kerry · Marco Ober, CC BY-SA 4.0
Who it is for
Individuals with non-pension capital to convert into income
What it does
- Bought with any capital, not only pension funds
- Part of each payment treated as a return of capital
- Same guarantee period and dependant’s options as the lifetime annuity
- Available from age 50
The product in full
A purchased life annuity does the same job as a pension annuity — a guaranteed income for life — but is bought with capital that was never in a pension. An inheritance, the proceeds of a property sale, a personal injury settlement or a business disposal can all be turned into income this way.
The structural difference is how each payment is regarded. Part of every instalment is treated as a return of the capital the member has already paid in, and part as interest. Because those two components are treated differently, the net position for a given gross income is generally better than the same income from pension money. How much better depends on the member’s age at purchase and on their own tax position, which is a matter for their adviser rather than for us.
The contract is available from age 50 — five years earlier than the pension annuity — because there is no pension access age to satisfy. Everything else, from guarantee periods to dependant’s pensions to enhanced underwriting, works exactly as it does on the lifetime annuity.
Literature
Product literature is issued to appointed intermediaries. Ask your underwriter, or request it through the enquiry form.
- Key features documentOn request
- Quotation requestOn request
How it works
What happens, in order
From the first enquiry to the point the cover, the contract or the facility is in place.
The capital and its source are established
Non-pension money, with the usual source of funds evidence. Available from age 50.
The income shape is chosen
Level or escalating, guarantee period up to thirty years, and any dependant’s pension.
Health is underwritten
On the same basis as the lifetime annuity, with enhanced terms where life expectancy is shortened.
Income is paid for life, split into two parts
Each payment carries a capital element and an interest element, and the split is fixed at outset from the member’s age and the terms.
The numbers
A worked example
Illustrative arithmetic, so the shape of the product is visible rather than described. Nothing here is a quotation or a projection.
A £200,000 property sale, converted to income
A member aged 68, on illustrative terms. The split shown is the mechanism this product exists for.
- Capital appliedProceeds of a property sale — not pension money
- £200,000
- Gross incomeIllustrative 6.5% at age 68
- £13,000 a year
- Treated as return of capital
- £8,400 a year
- Treated as interest
- £4,600 a year
- Paid monthly
- £1,083.33
- Guarantee period selected
- 10 years
Illustrative and not a quotation, and emphatically not tax advice. The capital and interest split is set at outset from the member’s age and the annuity terms; how each element is treated depends on the member’s own residence and circumstances, and belongs with their adviser.
What a year of income is made of
The £13,000 illustrative income above, split as the contract sets it.
Gross annual income
£13,000
- Return of capital£8,400 · 65%The member’s own money coming back
- Interest element£4,600 · 35%The return on capital still held
View these figures as a table
| Amount | Share | |
|---|---|---|
| Return of capital — The member’s own money coming back | £8,400 | 64.6% |
| Interest element — The return on capital still held | £4,600 | 35.4% |
| Gross annual income | £13,000 | 100% |
Suitability
Where the Purchased Life Annuity fits
The cases it answers, the cases it does not, and what an underwriter needs before quoting.
It is the right answer when
- Non-pension capital that the member wants converted into a guaranteed income.
- Members aged 50 to 55, who cannot yet use a pension annuity.
- Cases where a settlement or a sale must produce a dependable income for life.
Look at something else when
- Pension money — that is the Lifetime Annuity.
- A member who may need the capital back.
What we need to quote
- 1.Date of birth, the capital available and evidence of its source.
- 2.The income shape: escalation, guarantee period, dependant’s pension.
- 3.The medical questionnaire where enhanced terms may apply.
Questions
What brokers ask us about this product
How is the capital element decided?
From the member’s age and the annuity terms at purchase, and it is fixed for the life of the contract rather than recalculated each year.
Can pension money be used?
No. Pension funds buy a pension annuity, and the two are separate contracts with different rules.
Are enhanced terms available?
Yes, on the same basis as the lifetime annuity. Medical and lifestyle factors that shorten life expectancy increase the income.
Request information
Ask us about the Purchased Life Annuity
The form reaches an underwriter in Dublin. If you are an intermediary, say so and we will route it to the broker desk.