What is a Value Protected Annuity?

11th January 2012

As a relative newcomer to the annuity market, value protected annuities were introduced in 2006 as a form of insurance policy, to ensure that if you die   you are protected against the loss of some of your annuity investment. The system is designed to pay a return of any unpaid income in the event of an early death, so your family or beneficiaries are able to make a claim for any money that you have left over in the event of an untimely death.

Value protected annuities can be a great way of insuring your annuity income from any untimely deaths and helping to ensure that your family or partner is cared for in this situation as any unpaid money will be returned to them  in the event of your death. It should be noted that  the amount of capital returned will be subjected to the prevailing tax rate at the time.

What types of Value Protected Annuity could I take out?

There are  2 main types of value protected annuity that are currently available to you and these include:

  • Single First Life Protection – This is designed to cover an individual who is using an individual annuity plan, it ensures that  the capital amount invested, minus gross income paid out is paid to the nominated beneficiaries of the annuity plan. A tax charge of 55% (2011/12) would apply to this amount.
  • Joint Second Life Value Protection – This is designed for couples with a joint annuity and comes into effect if both partners die.. Any remaining capital less gross income paid out   is then paid on to their beneficiaries minus tax.

What benefits might this give me?

Many people choose to take out a value protected annuity as a form of insurance to help protect their assets should they die at an early age. This type of plan comes into effect well if there is an unexpected death and it helps to ensure that any beneficiaries are not left financially struggling after a family death.

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