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Time to Purchase An Annuity?

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Purchasing an annuity with your pension plan could cost you more after 21st December 2012.

If you are thinking about purchasing an annuity with your pension fund in the near future, changes that come into effect on 21st December 2012 could have an important impact on the income you receive.

When you decide to retire and take the benefits from a personal pension plan there are different ways that you can elect to take the benefits. The most common way, however, is the purchase of an annuity. This is an exchange of the value of the accumulated pension fund for an income for life. The size of this income depends on a number of factors including, age, gender and health. This income can be on a single life basis or a joint life basis and also include guarantees.

Traditionally a male would receive a larger income than a female with a similar sized pension fund and of the same age and health. This is because male life expectancy is less than female life expectancy and pension providers would therefore expect not to have to pay the pension to the male for as long.

A recent ruling by the European Court of Justice has ruled that this practice is discriminatory on the grounds of gender and is unfair. As a result the annuity rates for males and females must be aligned from 21st December 2012.

As it is likely that annuity rates for males will become less favourable, if you are male and are thinking of retiring and taking your pension in the next couple of years, it might be worth considering purchasing your annuity before 21st December this year.

Remember however, that annuity rates are dependent on many other factors. For example:

Just as interest rates fluctuate, so can annuity rates.

Annuity rates tend to increase with age so by delaying annuity purchase the rate could become more favourable.

Certain medical conditions could give rise to an entitlement for an enhanced annuity rate.

Annuities cannot usually be taken before the age of 55 and although the upper age limit of 75 has recently been abolished there are certain restrictions in delaying after this age.

If you are unsure about your options and how these changes could affect you then please contact SWLaw Investment and Financial Planning on 01752 205205 or see