Why do personally tailored annuity rates matter?

Why do personally tailored annuity rates matter?

Despite their bad press recently, annuities still remain the firm favourite for a majority of new retirees.. and with good reason. They offer the security of a fixed income for life and with the ability to match inflation and/or offer spouse support. However many people are simply purchasing an annuity from their pension provider without comparing the market to find the best rate, potentially losing them tens of thousands of pounds. I’ve asked Ryan from Compare Annuity to give us more information.

 

As you approach retirement, you can expect to receive a quote from your pension provider with your personal annuity rate. This will state how much your pension fund is worth, and how that translates into a monthly payment for your lifetime retirement income. But if you’re thinking of going right ahead and accepting the quote – STOP! There are two steps you need to ensure you take before accepting any sort of annuity deal you’re offered.

Step 1 – Compare your Annuity Rate

The annuity rate quoted to you by your provider may be the best possible rate you can achieve with your pension fund, although statistically that’s unlikely. A Financial Conduct Authority report found that 8 out of 10 people who stayed with their current provider lost out because they didn’t shop around and did not switch. Annuity rates must be personally tailored in order to ensure you the best return on your pension fund.

An annuity calculator allows you to input your pension fund, age and other important details in order to provide you with roundabout quotes from the whole of the annuity market. Any online annuity calculation still cannot provide you with an accurate quote though – so be aware of the ones that state they can. Online annuity calculators can only give you an estimated figure due to varying factors that can affect your rate, including enhanced or impaired health annuities.

Paul Goddard, independent financial advisor at Sheffield’s Fundworks explains: “Personally tailored annuity quotes will get you the best possible rates available by using all your personal details including your spouse’s health as well. A lot of people aren’t aware that annuity rates can vary depending on the health of your spouse.”

Step 2 – Speak to an IFA

We cannot stress enough the importance of seeking financial advice from an advisor who is independent and unbiased. They will be able to look at all of your circumstances and advise on which annuity would be best for you, not just in terms of who the provider is but which type of annuity would best suit your needs.

An IFA can also assist you if they feel you may be eligible for a higher rate with an enhanced or impaired health annuity – where a provider will give you a greater rate if they deem you to have a lower life expectancy than average. This could be through lifestyle choices such as smoking, if you are on medication, have a pre-existing medical condition or even just choosing to purchase your annuity later in life. Enhanced rates have been reported at up to 40% higher than the initial rate offered. Paul Goddard clarifies, “IFAs have access to all the companies that can give enhanced annuity rates depending on the health of both the individual and their partner”

Even more bespoke quotes have been introduced from June 2014, taking into consideration additional factors such as your location and the life expectancy in your area, and these additional personal details have seen rates improve from 0.1% up to 2.9% on the original quote.

As you approach retirement

  • Once you’ve received your annuity quote from your pension provider, compare your quote with the whole of the market using an annuity calculator. Don’t miss out on potentially thousands in income.
  • Speak to an independent financial advisor. As annuity specialists, they can advise you the best way to make the most of your pension fund in retirement.
  • Take advantage of personally-tailored, bespoke annuity rates for a retirement income for life.

Ryan Smith is one of the content writers at Compare Annuity, allowing the opportunity to compare annuities with the whole market and connect with an independent financial advisor in your area.

Leave a Reply

Your email address will not be published. Required fields are marked *