Compare Annuities and shopping around for the best annuity rates could really increase your pension income by a significant amount!.
Following the pension changes announced in the 2014 Budget, please visit our recent pension articles with all the latest updates on the pension reforms here
For example an increase of 40% would see an annual income of £5,000 increase to £7,000; £2,000 a year more for the rest of your life, so it certainly can pay to shop around and compare annuities.
To help you compare annuities and get the most from your pension pot, here is our Online Annuity Checklist
1. Compare Annuities and Shop Around!
You don’t have to stay with your pension provider. Use the Open Market Option and shop around for the best annuity that suits your needs. Start by using the Annuity Calculator to see how much retirement income you could get, then speak to one of the experts at Key Retirement to discuss your options and agree the best course of action.
2. Choose the right Annuity
Standard annuity rates are based on the few known facts about you such as your age, how much your pension pot is worth, where you live, any tax free cash sum withdrawn and any additional choices you make such as index linking your income.
As the information about you is limited, the annuity rates offered with a standard annuity or a conventional annuity as its also known are not as advantageous as those offered with an enhanced annuity.
Enhanced annuity rates are based on additional information which results in a more personalised pension income quote.
You will be asked a broad range of questions about your lifestyle and health and in return, could benefit from a greater pension income.
Like any insurance plan, the rewards and costs are based on the likelihood of that event occurring. In this case, if the insurance provider assesses you as a higher risk which could impact on the length of your life, you will be given an improved annuity rate which in turns gives you a greater pension income. This is one of the few times in life when potentially you could be rewarded for smoking, having a high cholesterol level or suffering ill health.
The good news is that the experts at Key Retirement Solutions will compare annuities and do all the work so you do not have to worry about whether a standard or enhanced annuity plan is the right one for you.
Investment Linked Annuities differ from conventional annuities as your pension or savings are invested in the stock market. This means that your income could go up and down, depending on how your investment performs within the fund of the annuity provider.
Pension Pot less than £18,000: If you are over 60 years of age and have a total pension fund of less than £18,000, you can withdraw all or part of your pension as a lump sum, referred to as ‘Trivial Commutation’. You can also ‘cash in’ any individual pension pots of £2,000 or less, regardless of the £18,000 ceiling.
3. Enhance your Annuity Options
You will have the opportunity to further enhance your annuity when you get a quote and compare annuity options:
Tax Free Cash: You will be able to take a tax free lump sum of up to 25% of your pension fund to spend as you like. A word of warning; take care as the more you withdraw, the smaller your pension income will be.
Annuity payments: You can choose to have your annuity paid in advance or arrears; monthly, quarterly or even annually to suit your own personal budget.
Inflation Proofing: Hopefully you will be receiving your pension annuity for many years to come, so you should take into consideration the impact inflation could have on the true value of your income.
You will be given several options to protect your income: please note that the more protection you build into your plan, the greater reduction you will see in today’s income. You are effectively sacrificing income today for increasing the income you receive for each subsequent year.
Dependents Pension: This option allows you to nominate a spouse or dependent to receive a percentage of your pension when you die. Once again the impact of this will reduce your pension income.
Guaranteed Period: Ordinarily if you were to die soon after starting the plan, your annuity would stop, so you could build into your annuity a guarantee that ensures continued payment of the income for a fixed period of time.
4. Feel comfortable with your decision
Over50choices provides comprehensive guides and information that give you a greater understanding of your options and how to compare annuities and of course the experts at Key Retirement are on hand to help guide you through the process.
Over50choices and Key Retirement provide free factual information, help and guides, however neither company offer advice.
If you are seeking independent financial advice, you can find an adviser at www.unbiased.co.uk. They will make a charge for this advice, so it is worth asking how much before going down this route.