Finding the best annuities provider and the best annuity rates is vital when securing your retirement income. As with most things it is usually sensible to shop around to find the best deal before making a purchase. When the time comes to buying an annuity, to provide you with an income during your retirement, it is important to remember that this is a once in a life time decision. Once purchased, your annuity cannot be transfered or exchanged and will be with you for the rest of your life. With this in mind, the annuity which you eventually choose will impact heavily on your future financial security and it is important that that you choose very carefully.
A pension annuity is a contract with an insurance company which will provide you with an income for the rest of your life in exchange for your pension fund. It is usually best not to purchase an annuity from your exsisting pension provider without first making sure that they are offering you the very best rates available. Buying an annuity directly from your pension company could cost you thousands of pounds over your lifetime and it is usually possibly to recieve a larger retirement income from a different annuity provider. Always check the annuity rates from a variety of providers before commiting yourself as your final choice of annuity will impact heavily on your future financial security.
Here are a few questions to consider before purchasing your annuity.
How healthy am I?
If you suffer from certain medical conditions you could be entitled to an enhansed annuity rate of up to 30%. If you are a smoker, have been hospitalised for a series condition, have a current medical condition or are currently taking perscription mediciation you could be eligible to an increased income from your annuity. You do not have to have a serious medical condition to qualify for these enhanced rates.
Do I want my annuity to cover my partner in the event of my death?
If you want your partner to continue to recieve benefits from your pension, if you die before them, you will need to purchase a joint life annuity. This will enable your partner or spouse to continue to recieve to an income untill their death. You can choose what percentage you would like your partner to recieve and this in turn will effect the initial income which you recieve.
Do I want to secure my annuity against the effects of inflation?
If you are worried that the effects of inflation over time will decrease the value of your pension income then, you can choose to take an annuity that provides an income moving in line with the retail prices index. This will, in effect, keep the buying power of you pension inline with any future price rises. You can also choose an income that increases by a fixed percentage every year. Over time this might provide you with a greater total income than a level annuity although the initial income was lower.
Do I want my pension payments to be guaranteed for a certain period of time?
All annuities will pay you an income for the rest of your life however if you are not going to purchase a joint annuity and you die before your partner, they will no longer be able to recieve the benefits from your pension. It is possible to have your payments guaranteed for a specific period of time, usually between five and ten years, this will provide a continued income to your estate or specific persons named in your will.
Choosing which annuity provider can be a difficult decision and it is often sensible to seek Independent Financial Advice.