As part of our mini series on how to get a bigger pension, we thought it a good time to write about annuities.
How does a pension work?
In simple terms, you save in a pension fund for years and then when you reach retirement date you have hopefully built up a nice pensions savings pot. This is then invested to provide you with a regular income. This is known as an annuity. The rates of annuity (your interest rate return) vary depending upon what type of annuity you have. You can have one that pays a level income, increasing income, guaranteed payment periods, spouses pensions on your death and more. Each extra feature you add will cost more i.e. it reduces your starting income level. The earlier you retire, the longer the income will have to paid out so it will start lower and the later the you leave it the greater the income as the payment period is less.
How can I get more?
Reverse psychology . When you apply for life insurance you want to be healthy to get it cheaper. When you apply for an annuity you need to convince the provider that you may not live as long. Your rate may be improved to reflect the fact that it may not be paid out for as long. Tell them the truth! If you are ill - tell them. If you smoke - tell them. If you have a heart condition - tell them - all these factors and many more may improve the annuity rate that is offered to you.
Where do you live? If you live further north you may get a better rate than people in the south. Don't just accept the rate that you are offered by your existing pensions company. Shop around. You have a right to.
Impaired life and Enhanced Annuities are becoming more common, think about them before you retire.
Contact us to do the shopping around for you. Complete our annuity enquiry form now. It may make you a few pounds a year for life!
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