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:
“..while this may be the right decision for some, it is also a risk and depends on how certain you are that the markets will recover during this period, and also how certain that annuity rates will improve.”
The study suggested that if a 65 year old person with a retirement fund of £50,000 had put off the purchase of their pension annuity for just one year, they would have had to wait a further thirteen years to make up their shortfall.
As Barton said, it can be very difficult to predict what will happen in the market so unless you feel the market is in the process of recovery, it’s probably a good idea to shop around for the best annuity rate you can get at the time.
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