Crisis forum | Don't waste precious annuity income

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Don't waste precious annuity income

User Post

1:52 am
May 16, 2010


Cranleigh, Surrey

New Member

posts 1

Millions of us are keen to save money by shopping around and purchasing a wide range of goods online and by using online deposit and Cash ISA accounts.

However, we do not seem as a nation to have woken up to the fact that when we retire we need to shop around to get the most appropriate, most competitive, pension income from the pension funds we have accumulated.

Far too many people simply take the annuity offered to them when they retire. In case you are not sure, an annuity in this context is the pension income you will receive for the rest of your life which is paid for by the pension fund that you, or you and your employer, have built up. It is estimated that two thirds of people who have taken the trouble to build up a private pension fund throw away part of the guaranteed income that it can produce for the rest of their lives when they retire.

Setting up an annuity is a decision which, in most cases, cannot be changed. It is equally astonishing, therefore that so many people go ahead with the choices offered to them by the pensions provider that they built up their pension with, when that pensions provider will, in most cases, be prohibited from offering them advice .

A little knowledge

Even those who do look at the most competitive annuity rates in financial magazines or online tables can easily fall foul of the old addage that ‘a little knowledge is a dangerous thing’. For example they may not realise that some annuity companies will pay 2% more to someone living in Warrington, Cheshire than where I live in Guildford, Surrey. That may not sound a lot but if that person lives for 25 more years it can add up to a useful sum.

It is estimated that 40% of people can qualify for some type of enhancement to their annuity rates. This may be because they smoke, are seriously overweight, or have had a serious illness or major surgery. Given the odds, it really is a tragedy that so few people bother to investigate this possibility.

Our new Guide: Annuities

We have just produced a new guide which tries to explain the financial implications of some of the choices that you are expected to make when you purchase an annuity. Of course, not everyone will want to purchase an annuity with their pension fund and certainly if the total of your pension funds is over £250,000 then you should talk to an independent financial adviser (IFA) about the possibility of keeping your fund intact and drawing amounts from it each year to supplement your other retirement income.

It is also important not to wait until you reach retirement age before collecting your annuity quotes etc. With financial advisers moving to a fee basis the last thing you want to do is turn up at your adviser’s office with five different pension pots from which to purchase an annuity. An IFA should be able to investigate now, using specialist software, whether you can consolidate some of those pension pots ahead of time.

You can download our new annuity guide from our website at . If you find it helpful please let me know.

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