Why Aren’t People Getting The Best Annuity Rates?
April 29, 2008
It is approximately six years since the FSA (Financial Services Authority) made it obligatory for insurers to tell people that they had the right to do what is called ‘exercise their open market option’ and that is just a posh term for ’shop around’.
However, despite the insurers telling people this – in not too forceful a manner, of course, and usually buried in the middle of mounds of literature in tiny small print – apparently two thirds of people do not bother to look for a better deal.
It is actually possible, believe it or not, to increase your retirement income from an annuity by over 40 percent just by dong a little research. This is one of the most important decisions of your life, so why aren’t people spending a little time on it?
Hargreaves Lansdown’s pensions analyst Read more
FSA Investigation Into Timeliness Of Annuity Transfers
April 25, 2008
According to many IFA’s, and certainly by the look of our recent article about how one client claimed it took him two years to get his annuity transferred, many insurance companies regularly go over the time limits and with no comeback on them they are unlikely to change.
Now, they are calling for the Financial Services Authority (FSA) to investigate.
According to the Association of British Insurers, it should take no more than two weeks to sort out the paperwork and transfer the annuity, however, one senior IFA, James Jones-Tinsley, an adviser for Pearson Jones PLC Read more
The Scots Suffer Because Of The English
April 3, 2008
The English live longer than the Scots, they have a much higher life expectancy. However, the Scots buy the same annuities as the English, which are calculated on the English life expectancy. This means that the Scots are getting a lower pension annuity income.
Some areas of Scotland have the lowest life expectancy rates in the UK. According to the recent tables compiled by actuaries Punter Southall, only one area of Scotland, East Dunbartonshire, has a longer life expectancy than their English counterparts. Read more
What Is An Annuity’s ‘Guarantee Period’?
March 28, 2008
When you take out an annuity, most annuities will include a minimum guarantee period. This is the length of time that they will pay out for, regardless of whether you survive the guarantee period or not.
In most cases, this guarantee period is between five and ten years.
Consider Annuity Rates When Transferring Old Pensions
March 27, 2008
In today’s society, people move jobs much more often than they used to. Gone are the days when you would take a job for life.
As a result, many people have old pension schemes they may even have forgotten about. Those who are a little savvy may consider transferring their old pension schemes into their new one to make sure they don’t forget and they have all their pension in the one scheme.
However, before you do that, remember to consider the following:
Depending on the age of the pension scheme, many older schemes came with guaranteed annuity rates, otherwise known as a GAR. These were quite common in pension schemes written from the 1960’s to the 1980’s. Those old guaranteed annuity rates are often more generous than the newer schemes are so check it out carefully before you do anything. The open market option means that you can shop around to buy an annuity when you retire, but it isn’t worth losing out on a potentially more valuable guaranteed annuity rate in the meantime.
However, also consider how large the pension find is that is in that scheme and the fund charges. Older pension schemes also had higher charges and if the charges are eroding your fund then it might still be worth switching. If you are unsure, take specialist financial advice.
Putting Off Buying An Annuity Could Cost You
March 21, 2008
A study by Just Retirement recently demonstrated the costs involved in deferring the purchase of your pension annuity.
It is a common thought that if you put off buying your annuity for a few years then your investment will have time to increase and then you will have more money and could buy a better annuity.
However, Nigel Barton from Just Retirement says Read more
Caution Urged With IMA Retirement Proposals
March 14, 2008
Earlier this week, we wrote about how, under current regulation, a person is forced to buy an annuity no later than the age of 75 and how some were hoping that the age limit might be increased in this week’s Budget.
The age limit wasn’t increased this week but the Investment Management Association (IMA) has produced a report recommending this change and are waiting to hear the government’s response. They would actually like to se the age limit removed completely.
Happy Tidings For Small Pension Pots
March 13, 2008
In the Budget report on Wednesday, Alistair Darling announced that individuals who have only a very small occupational pension fund will no longer be forced to buy an annuity.
Although this is great news, it does apply only to those who have less than £2000 in their pension and that £2000 must be in a single pension scheme and that pension scheme must be an occupational one, so it doesn’t apply to your stakeholder pensions.
Under current rules, anyone with a pension pot of less than £2000 would be allowed to take the full amount as cash but only 25% as a tax free lump sum. The rest would be taxed as income. However, the current rules add up all of your pensions so many people are left with a small pension fund. For example, if you had £20000 in one pot and £2000 in another, then your total pension fund is £22000 so you are above the threshold (£16000) and have to take the £2000 according to the rules, i.e. you get up to 25% as a tax free cash lump sum and the remaining £1500 must be used to buy an annuity.
With these new changes in force, then providing that £2000 was in an occupational single pension scheme, you could opt to take the full £2000 as a tax free cash lump sum.
Buying an annuity with such a small sum is not cost effective at all and means you don’t get much for your money. When you have a small pension fund such as this, it becomes even more important to shop around and be sure you’re getting the best value for your money. Unfortunately, £1500 is below most annuity providers minimum purchase level so then the person is forced to stick with their current provider.
If it’s looking likely that you may have one or two small pension pots, it might be worth combining them. Some pension funds can be transferred to another although this can depend on your age at the time of transfer and value of the pot. To make the most of your pension and to make sure that your annuity options for shopping round at time of retirement are best for you, seek advice from an independent financial advisor.
Annuity rates update
February 19, 2008
Norwich Union have recently improved their annuity rate offerings to retired people of 60 plus. Its worth checking it out.