Annuities came under the spotlight at a recent National Association of Pension Funds conference. Dr Oonagh McDonald, chairman of the Retirement Income Reform Campaign spoke out and accused that annuities had been designed to protect the State rather than the interest of consumers.
She criticised the fact that information about annuities was lacking, especially regarding the fact that women receive lower annuity rates than men. Questions were also raised regarding the value for money of annuities, especially if they are purchased at a person's normal retirement date, rather than later on in their 70's.
Our View
The rule that you must use your pension fund to purchase an annuity at age 75 is rapidly becoming outdated, as people live and work longer. Whilst there have been rumblings about the age being raised or abolished altogether, people still need to understand about annuities and the choices they have.
When you purchase an annuity, you do not have to buy it from your pension company, but can shop around for the best rate. Annuity rates do vary between companies and where one company will give you £100 per month in return for the pension fund you have built up, another company may offer £200 per month.
Annuities are very final and it is therefore vital that the right one is chosen. Once you have made your choice and exchanged your pension fund for regular income payments, there is no going back.
Learn more about annuities and 'at retirement' planning in the Pensions Adviser.com .