When investing in a retirement annuity product with a life assurance company, ensure you are aware of potential penalties involved in the event of you reducing or stopping your annual premium increase.

Ultimately one is strongly advised against not increasing their premiums as this has an adverse impact on growth, combatting the ill effects of inflation and of course the final maturity figure.

The ‘alteration’ charge is not generally hidden and is normally disclosed in the contract. Unfortunately voluntary addition lump sum injections do not pardon one of the penalties should they decrease or cease increases in contributions. One reason behind this is if an advisor is paid upfront, the fees are recouped by penalties.

An ‘as-and-when’ commission structure can alleviate most of the penalty. Fortunately the industry is putting legislation in place to ensure the best interest of you, the client, is met.

Financial planning is very crucial when investing in a retirement annuity. Remember the product should be a solution to any shortfalls identified after an analysis is conducted and should be avoided as a ‘single need request’ as far as possible.

Generally when a retirement design is in place there is no need to deviate from the plan unless there is a grave financial situation where one is forced reduce or stop premiums.

All in all, the tax and planning benefits is reason enough to invest in a retirement annuity but a careful and informed decision should be made.