Best Annuity Rates
Planning your retirement finances
Unless your pension scheme is one that pays you a regular income – as some final salary schemes do – it is crucial that you plan your retirement finances carefully. Making sure you have enough money to live on could easily mean the difference between enjoying your well earned retirement or scrimping, saving and worrying.
If your pension provides you with a lump sum, then an annuity is often the best option for providing a regular income. You can take up to 25% of your pension fund as a tax-free lump sum and use the rest to purchase an annuity.
What is an annuity?
An annuity is a contract between you and an annuity provider. They agree to pay you a regular income in exchange for a lump sum investment.
There are two kinds of annuity:
- Pension annuities are bought with a pension fund.
- Purchased life annuities are bought with savings or other personal money.
You may get back less than you invested in your annuity if you die younger, or you may receive much more if you live long into old age. Your annuity rates will be calculated by taking into account a wide range of factors, including age, health history, postcode and sex, although this will change when the new EU regulations become law on December 21st 2012.
Enhanced annuities or impaired annuities offer bigger payments to people with health issues, who may have a shorter life expectancy.
How do annuities work?
Annuities provide a guaranteed income for the rest of your life. They also give you a range of annuity options. These include providing the same income, or a percentage of it, for your spouse or partner after your death.
There is no risk with a pension annuity, as you are guaranteed to receive the payment you have agreed for the rest of your life. There’s even the option to include annual increases in your annuity rates to account for inflation, or even index link your annuity rates so they are guaranteed to keep pace with the cost of living.
However, there is no cash in value for an annuity and you will not be able to change your mind once you have agreed your annuity rates. This is why it is really important that you choose your annuity carefully.
How to get the best annuity rates
There is no obligation to buy an annuity from the same company that you saved for your pension with, yet remarkably, figures from the Association of British Insurers show that up to 61% of people do just that. This is one instance where loyalty doesn’t always give you the best deal, however.
By shopping around, using the Open Market Option, annuities4U can find you the best annuity rates. Try our annuity calculator now to see how much you could get.
By searching out the best annuities you could add many thousands to the payments you receive through your retirement, making a big difference to your lifestyle and your financial security. See also help on life insurance for diabetes.
