The Compulsory Purchase Annuity (CPA) can be bought whether you are about to retire or else you have several years of work left but are looking to make a prudent investment decision.This is an ideal choice for those hoping to use their pension fund to produce a comfortable income during retirement.
A Compulsory Purchase Annuity will use the money you have already saved up during your pension and create an income for life. One of the best things about a CPA is its versatility. Everyone has different needs and has a different amount of money so tailor made options are essential.
About Compulsory Purchase Annuities
You can use the money you have saved up in your pension plan as long as you adhere to certain rules:
You must already have utilised your tax-free lump sum payment
Any money used to purchase a Lifetime Annuity comes from a registered pension scheme
The scheme which is to provide the money allows this type of purchase under its rules
It was possible to purchase a CPA aged 50 but this has been increased to 55 under new regulations. You may decide to have a guaranteed payment as part of the terms of your CPA but the last payment must occur before you turn 90. You cannot buy a CPA worth less than £5,000 or worth more than £500,000 depending on the provider.
While a Compulsory Purchase Annuity offers greater flexibility, it may not be for everyone due to the high minimum income level required. Potential alternatives for those unsure of the profitability of CPA’s include ISA’s and property investment.