Retirement advice from The Pension House Co Ltd
An annuity is an income for life, and it stops when you die – so it is important that you get the most value out of your pension fund when purchasing your annuity. The Financial Conduct Authority (FCA) advise you to shop around, but doing this for yourself is not an easy task as you need to access all the annuity rates available from all of the insurers and you need to know what you want:
The FSA are saying that there are many Annuity options to choose from. Additional Options mean your starting income will be lower: You need to be aware that the more ‘add ons’ you take up the lower the starting income will be. So it is important that you engage with an adviser to help you priorities your needs. Contact Us
Widows Pension: Is this annuity income just for you or does it need to continue to pay an income to your spouse if you die first, and if so how much 100% or 50% or something else? How much would that cost and ‘what if you buy a spouses income and then they die before me’ ‘you could have wasted money?’ So how important is the spouses income? This is not such an easy decision is it!
Guarantees: ‘What if you should die early’: you can build in some protection to your fund but how much protection would you desire and at what cost? But what if you don’t die early (well you wouldn’t want to – would you?), but if you don’t die early you could have wasted your money? Decisions! NOTE: If you have a medical condition that reduces your life expectancy, you may qualify for an Enhanced Annuity to find out more see our dedicated page: Enhanced Annuity
Level Income or escalating: Is a level flat annuity wise? This annuity income is to be paid for the rest of your life, if you live for a very long time, your annuity will lose its purchasing power over time – so should you choose an escalating annuity income, and if so how much 3% pa, 5% pa or RPI or something else? But what if you die soon into retirement you’ll have taken a lower starting income when you could have had a higher income and enjoyed it. Hmm again not an easy decision, because we don’t know how long we will live.
Here at The Pension House we will help you prioritise your needs in retirement and shop around for the best annuity rates on the market for you. We may find that annuity purchase is just not flexible enough to accommodate your needs and we may advise an alternative course of action to gain some flexibility for you or indeed a combination of structures so your income in retirement is the best fit for you.
ANNUITY PURCHASE – TIMING: To generalise, the older the annuitant the higher the income. Putting off buying an annuity will mean a bigger income in retirement – right? No perhaps WRONG! There is no guarantee that annuity rates will be at the same level in the future. If annuity rates fall during the time you have delayed, then even though you are then older you may not get a larger income in retirement. This has been true over the last 10 years as it is not now possible to buy the income that was available 10 years ago with the same fund. Of course, the past is no guide to the future and annuity rates could indeed rise again and being older, you would then get a better income later. Annuity rates are currently at a very low level.
You should understand that there is risk in delaying! And FACT: You will not live any longer because you delayed taking your pension. Your pension will simply be paid to you for fewer years. There is a cost to delay!
However, there is a fine balance, as taking your pension far too early will have a detrimental effect on the purchasing power of your income.
…………and that is why you need advice, call our Helpdesk or contact us online for enlightenment in the current century!
Call our helpline to discuss your needs without obligation tel: 01604 588293. Or contact us online and we will get back to you at a time convenient for you. Contact Us