On Wednesday 19th March 2014 the Government announced important changes to pension rules. From April 2015 retirees who have been saving into a defined contribution pension scheme will be able to access their fund however they so choose. Retirees will still be able to take up to 25% tax free, with any additional drawing being taxed at the individual’s marginal rate.
Should I still consider an Annuity?
If you are coming up to retirement, you may be wondering which options to make financially when you retire. One of the most common questions is what kind of lifestyle will you be able to afford when you retire?
Do you like the idea of a guaranteed income in retirement?
After working hard all your life, your retirement should be there for you to enjoy, not having to worry about money all the time. Make the right choices and you can look forward to a long and enjoyable retirement.
To achieve this however, it is important that you shop around carefully for the best annuity. Picking the best annuity will make a significant difference to the amount of income you get monthly from your pension pot. You can only secure the highest annuity offer by comparing rates between providers. The offer from your current pension provider is unlikely to be the best deal on the market, so speak to us today and we can tell you which provider has the best deal.
What is an Annuity?
An annuity is a means of protecting your income and lifestyle after you retire. Once you reach retirement, you have the option to convert your pension pot into a guaranteed income for life. You can release 25% of your lump sum tax free, with the rest being paid to you in monthly payments which are subject to income tax.
How much income will I get?
This will depend on a number of factors such as…
-The size of your pension fund
-How old you are
-Your state of health
-Your location in the UK
-The type of annuity
-Whether you opt for a single or joint-life annuity.
Which Annuity is best for me?
There are dozens of annuity products on the market in the UK. The vast majority of retirees opt for a standard level annuity also known as a conventional annuity. These types of annuities pay the same amount every year until death. However, they do not take into account the rising cost of living. If you are worried about inflation, the future cost of living or care home fees, then you may also want to consider the following annuities…
- Increasing annuities – There are various annuities which have escalations built into them including inflation-linked or RPI annuities. These will peg your annual income to inflation or other percentages to protect you against rising prices. However, your starting annual income will be lower compared with a level annuity.
- Investment-linked annuity – Standard annuities are invested in gilts (government bonds) as they bring a steady and dependable return for the insurer. However if you have a larger pension pot, typically over £100,000, you may want an investment-linked annuity, as you can choose to invest in the stock market with the chance of higher returns. The downside is if the market does not perform, your income may go down.
- Guaranteed annuity – Your annuity income will be passed on to your nominated individual for a specified period on your death, should this occur soon after retirement.
- Joint-life annuity – Your income will be passed onto your loved one if you die before them. This is popular with those who are married as it protects the income for your partner once you pass away.
Five Annuity tips…
- Shop around between providers.
- Speak to an IFA or annuity expert.
- Think about the future, will inflation rise, will your circumstances change?
- Don’t be afraid to switch annuity providers.
- Check if you are eligible for enhancements.
Which annuity providers do we use?
Some of the pension annuity providers we deal with include Aviva, SAGA, Standard Life, Just Retirement, Abbey Life , AEGON, Aviva, AXA, Canada Life, Co-operative, Friends Provident, Hodge Lifetime LV= , MGM Advantage Nucleus, Partnership Phoenix Group, Prudential, Scottish Life, Scottish Widows, Skandia, Standard Life Windsor Life and Legal & General.