What Is A Guaranteed Annuity Rate (GAR)?
March 31, 2008
A GAR is otherwise known as a Guaranteed Annuity Rate. These are rarely offered in today’s pension schemes but were quite common in pension schemes written in the 1960’s through to the mid 1980’s.
This guaranteed annuity rate is the minimum income that the pension scheme holder must offer you as an annuity when you retire, so you have a Read more
Disadvantages of Guaranteed Annuity Rates (GARs)
March 30, 2008
We talked in an earlier article about the advantages of sticking with an older pension scheme if it included a guaranteed annuity rate as one of its benefits. However, nothing is ever free so there is the odd catch. Always check the small print, but here’s what you are likely to find 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
Pension Annuity Considerations For Women
March 19, 2008
Many women face an even more uncertain retirement than men, which is a huge worry considering their life expectancy is longer. When buying an annuity, all providers take into account your life expectancy so in order to stay equal women actually need to save more into their pension than men do.
However, with career breaks, bringing up children and lower salaries across the board, women have it tough. NFU pension specialist
Is Your Pension Fast Becoming A Lottery?
March 18, 2008
How can you save a decent enough sum of money so that you can retire and be comfortably secure that you will never have to work again? For most people, the only way to do that is through a pension and when you get your pension, to buy an annuity to give you that security.
However, more and more people are not saving into a pension. The UK savings habit seems to have died. The culture of mounting debt appears to have finally hit home but is it too late? Many people are wising up to the problem and their priority now is to pay off their debt – that means no money for saving. Your pension is probably the last thing on your list of priorities.
What’s more, people don’t like pensions any more. They distrust the pensions industry and the government. The mis-selling scandals 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.
Budget Tomorrow: Will We Get An Increase To The Annuity Age Limit?
March 11, 2008
Tomorrow is the annual Budget and we are waiting with baited breath to find out if Chanellor of the Exchequer, Alistair Darling, may increase the compulsory annuity purchase age limit.
Currently, the age limit is 75, so if you haven’t used your pension fund to buy an annuity by then, you have no choice.
With an ever increasing Read more