Will I receive more or less than my pension pot in Annuity payments?
This is a question that some annuitants ponder, whether they will actually gain or lose from their pension annuity payments. That is will they receive more than all the money they put in or will they receive less? The truth is insurers will try and calculate this based on a number of factors such as health, lifestyle, location etc and try to make an assessment on how long you will live. Pension expert Laura Goodman who works at Rockingham Retirement said that “a man retiring at the age of 65 would have to live for a further 17 years just to get back the £30,000 he has saved in his pension. And we calculate a woman would have to live until she was at least 84 to recoup the £30,000 via a traditional annuity, based on today’s rates – which is just dreadful value.‘
With rates being so low (despite a small spike at the start of this year) it really underlines the fact that annuitants need to hunt around for the best deal in the market. Because rates are lower, annuitants are getting much less “bang for their buck” in terms of annuity payments, as insurers are paying out less than they would when rates were higher. Pension providers will normally err on the side of caution and calculate payments that favour them with the minimal financial risk of someone living miraculously longer than expected. With this in mind and with rates as they are, shopping around is essential.
