A Better Deal for your Retirement
You are about to take the benefit of all those years of building up your pension savings. You have been notified how much income to expect. It seems obvious to buy the pension annuity from the pension provider holding your retirement fund. That is precisely what the majority still do.
Wait ! Think again! Don’t go with the herd. Consider your options. This decision is for life. There may be a better deal. Traditionally, the pension fund is used to buy a pension income for life – a retirement annuity. There are a number of factors influencing the level of income you can expect.
Rates vary from provider to provider – it is highly likely that you will benefit by transferring your pension ‘pot’ to another provider.
Level or escalating : a higher income will be paid for a pension paid at the same rate throughout life but the value of future pension income can be protected by opting for some escalation or indexation of the pension.
Single or Joint Life: you may want to provide for a spouse by means of a joint life annuity even though this will reduce the pension rate.
Health and Lifestyle: increasingly, pension annuities are being underwritten to take account of health issues and lifestyle factors which might influence your expectation of life. Higher rates may be available depending on your circumstances.
Timing: the amount of pension will be determined by the size of your fund and the annuity rate. If the fund value is low and interest rates are low, this will be a double whammy. Ideally the fund will be encashed at the top of the market and the annuity bought when interest rates are high.
There are alternatives to pension annuity. It may be appropriate for you to leave the pension fund invested and draw income from it. This keeps your options open over a longer period, it can also enable you to provide for your family as the fund has not been ‘spent’ on an annuity.
There is a bewildering range of options but pension providers will be under obligations to give more information about options following the introduction by the Association of British Insurers of a new ‘Code of conduct on retirement choices’ . This is intended to help individuals find the best deal Insurers will have to write to those approaching retirement to set out their options.
This is an important decision. Get some independent advice. Get the best deal for your retirement. Speak to one of our advisers at SWLaw Investment & Financial Planning.
See also : Increased income from pensions