Many people, some say up to 1 in 3 retirees don’t shop around to buy their Annuity at retirement – and the Financial Services Authority want to understand why this is the case. By declaring health and lifestyle conditions you can boost the annuity rate you’re offered by up to 40%.
But people don’t seem to shop around for their annuity. The FSA want to investigate why, but we believe many people are simply not aware they have facility to buy their annuity from another company than the provider (s) that they have their pension savings with.
This lack of knowledge is costing people dearly – in the last decade savers have missed out on Billions of Pounds simply by accepting the Pension income offered by their provider.
Shopping around is easy and you could receive much more income. Because buying your annuity is one of the most important financial transactions you will make it’s important to make the right choice. This is especially so as once you have bought an annuity you cannot change your mind.
The way the system works is that, as you approach retirement your pension provider tells you the how much your pension is worth and how much income they will give you if you bought an annuity with them. The offer they make to you is unlikely to be the highest income available. But happily, the annuity market is competitive and it is likely you will be able to improve on your pension provider’s quote.
You can make your annuity made to measure for you, by comparing different types of annuity including those can pay a pension for your spouse, or include inflation proofing.
Also, if you smoke or suffer from ill health you could be able to get an extra boost or ‘enhancement’ to your annuity income. So it is important that you are not coy about your health. Annuity companies will pay as much as 40% higher income to people with certain medical conditions. There are hundreds of conditions that may qualify.
But, word of warning, you need to check the small print of your pension policy. In some cases the fund value may contain a minimum guarantee or there may be an annuity rate that is guaranteed at retirement or on specified events. This may be the case with older, with-profits plans and so it is important to check those policy documents before taking any action.
Clearly, this is a major decision to make in your financial planning, the first step towards making sure you’re getting the best deal at retirement is find out what annuity rates are available to you.
It only take two minutes to complete the simple enquiry form and then we, as your Independent Financial Advisors will do the rest of the legwork for you. Alternatively, please give us a ring on 0161 928 2706.