Pension Annuity Rates
Picking the best pension annuity rates could give your pension a significant lift. There are significant differences in the performance of the best and worst pension annuity rates and the advice of an independent financial adviser should be sought to ensure you get the best rates.
Best Pension Annuity
Many people assume that they have to buy their pension annuity from the company that has held their pension. This is not the case, as you have the right to shop around for the best pension annuity when you retire – it’s called the Open Market Option (OMO). Worryingly, figures from the Association of British Insurers (ABI) show that around 61 per cent of people do not shop around in this way.
Do you qualify for Enhanced Pension Annuity Rates?
If you can answer Yes to the following questions you may qualify for enhanced pension annuity rates.
- Do you smoke 10 cigarettes or more each day and have done continuosly for 10 years or more?
- Are you currently taking any medication?
- Have you ever been hospitalised for any medical condition?
Pension Annuities Explained
An annuity converts a lump sum (usually a pension fund) into a regular income that will last as long as you live. The income is taxable and the amount that you get each year will depend on the size of your fund, the best pension annuities the annuity company offers, your gender, age and health, and the type of pension annuities that you opt for. You are allowed to take up to a quarter of your fund as a tax-free lump sum and must convert all of your remaining pension fund into a pension annuity before the age of 75.
Which Annuity?
Most people opt for a conventional lifetime annuity, but there are several options to pick from. The best annuity rates can have the following options:
- Level annuity – Your income will stay the same each year irrespective of inflation.
- Increasing annuity – This can either match inflation for the rest of your life or rise by a specific percentage each year.
- Guaranteed annuity – This will continue to pay out for a time to a nominated individual if you die soon after retiring.
- Joint-life annuity – A joint life annuity gives your partner some or all of your continuing income if they outlive you.
- Investment-linked annuity – If you have a larger pension fund, you may prefer to invest it in the stock market. This means that your annual income could go down as well as up.
Checklist
Follow these tips to get the best annuity rates:
- Choose the best option. Shop around for the best rates using the open market option and don’t just accept what your pension company offers.
- Get good advice. It is important to talk to an independent financial adviser who specialises in pension annuities before you make your decision.
- Think about inflation. You can make your annuity ‘inflation-proof’ by having it increase in line with price rises, although you’ll start off with a lower income than if you’d chosen a level rate.
To get the best pension annuity rates using your open market option complete our online form opposite and we will send your annuity quotes