In this guide: How annuities compare, annuity rates & calculating your pension income with an annuity calculator
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It’s fair to say that unless you are in the industry, most of us know very little about annuities, so it’s quite understandable that when it comes to thinking about retiring, choosing an annuity can seem like a daunting task.
So just what is an annuity and is it really that daunting?
Quite simply an annuity is the name given to the insurance plan that your pension and / or savings are paid into, giving you a guaranteed income for life.
Over the years you may have paid into several pension plans, so it’s important to track them all down. If you are unsure as to whether you have any 'old' pensions from previous employers or pension companies, you can find out by using the Pension Tracing Service a free service provided by the government.
There are several types of annuity to choose from and some important things to take into consideration such as your health and lifestyle which will impact the pension income available, in some cases increasing it by thousands of pounds.
To help guide you through the process, you will find all the information you need at Over50choices with Age Partnership on hand ready to search the market for the best deals.
We make the whole process clear, straightforward and certainly not daunting.
When it’s time to retire you can do one of three things with your pension fund:
To help you see how much extra retirement income you could get, why not use the quick and easy annuities calculator, then if you want more information, the experts at Age Partnership are on hand to help.
If your pension pot is available to access from April 2015, the good news is that you will have greater freedom to choose what you do with your money.
Previously, up to when the proposals were announced, you were only able to withdraw a maximum of 25% of your pension pot as a cash free lump sum. The remaining amount had to be used to purchase an annuity however all this is about to change.
To summarise, from April 2015, you will be able to:
These changes will affect all pension schemes however if you are in a ‘final salary’ scheme, you should seek independent financial advice before withdrawing more than 25%, as you could be giving up significant benefits.
In addition, there are certain interim rules that have been implemented in preparation for these changes in April 2015:
Keep in mind that depending on your circumstances and financial position, withdrawing cash sums could affect your state benefits.
When the changes come into effect, help and guidance will be available from the Pensions Advisory Board, or you could seek advice from an Independent Financial Advisor, some of whom may charge for their services: the Money Advice Service can guide you on this.
Also visit our recent pension articles with all the latest updates here
Planning your retirement is an important task; too many people just let it happen; go with the flow and as a result don’t get the best financial outcome and lifestyle they have worked hard for all their lives.
See our Pensions & Annuity Questions & Answers Section for more details
A key part of retirement planning is ensuring that you have sufficient retirement income; so if you’re not planning on retiring for some time, it is worth reviewing pension plans as soon as possible to ensure you are in the best position. Quite simply the earlier you begin, the happier your retirement could be!
As retirement day looms, there are a number of things you need to do so it is wise to start planning your final preparations 12 months before ‘D’ day. A word of warning; don’t put it off as it will come around quickly.
Compare Annuities and shopping around for the best annuity rates could really increase your pension income by a significant amount!.
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
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 Age Partnership to discuss your options and agree the best course of action.
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 Age Partnership 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.
More information can be found at the Money Advice Service website.
You will have the opportunity to further enhance your annuity when you get a quote and compare annuity options:
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 Age Partnership are on hand to help guide you through the process.
Over50choices and Age Partnership 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.
Comparing annuity rates and getting the best annuity rate for your hard earned pension savings is one of the most important financial decisions you will ever make.
Once you have made your choice, you will be locked into that rate for the rest of your life; so choosing the right plan is key to optimising your retirement income.
Visit our recent pension articles with all the latest updates on the pension reforms here
Whilst each provider will base their pension annuity rates on your own personal circumstances such as age, health and lifestyle, they will also apply their own experiences and profit margins which is why they offer differing levels of income.
Some will offer greater enhanced annuity rates for different health conditions or optional features such as index linking; so you can see why shopping around is so important.
This shouldn’t be daunting though as comparing annuity rates is a fairly straight forward process provided you give yourself sufficient time to consider your options.
The Age Partnership annuity rate calculator is a good starting point to understand how much more retirement income you could get.
It’s worth noting that a bit like interest rates, current annuity rates fluctuate over any given period of time, so it’s always worth getting new quotes to ensure you are getting the best annuity rates just before you apply.
The team at Age Partnership will be on hand to answer any questions, search the whole of the market for the best annuity rates and help you make that final decision when the time comes.
Use the Annuity Calculator to see how much you can Boost your Pension Income.
You don’t need to know your exact retirement date or the precise sum of money in your pension pot, as you can update these at a later date. The annuities calculator will provide you with an estimated pension income, although more detailed annuity quotes can of course be provided.
It’s easy to use and once you have a feel for how much retirement income you could get, the team at Age Partnership will be on hand to search the whole of the market for the best annuity rates and see if you qualify for an enhanced annuity.
Remember that you don’t have to take your pension from your existing pension provider. Shopping around for the best annuity quotes not only means you could get a better pension income, it also gives you the option to tailor your annuity to suit your personal circumstances.
The annuity calculator is free and easy to use. It also gives you the opportunity to vary the amount of money you can take as a cash free sum (up to 25%) to see what impact it will have on your pension income.
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