Tag Archives: Pension Provider

What Options can I choose on my Annuity?

On reaching the minimum age of 55 years of age you may start to consider your options for establishing an income to last throughout your retirement. Usually your pension provider will send you out a wake up pack as your planned retirement date approaches. This pack will usually include a basic quote for you to take an annuity with them.

It is very important to establish the best rate that could be available to you by using your Open Market Option.

The Open Market Option (OMO) is your right to take your pension fund to another provider to purchase an annuity or alternative retirement income. As the difference between the best and worst annuity rates can be considerable, it is worthwhile taking the time to find the best possible income for your given requirements.

If you have pension funds from a number of different pension schemes it is usually beneficial to take a view of the whole pot of savings as better annuity rates can sometimes be achieved for higher fund values.  Where a number of arrangements are to be used it is normal for the funds to all be transferred to the annuity provider to purchase the annuity under an Immediate Vesting Pension. This means that all funds are transferred over with the tax free cash being paid by the new provider, rather than the ceding scheme.

The rate applicable will be determined by the age, health and up to December 2012 your sex. From December 2012 to new EU Directive means that no differential in cost can be applied due to the applicant’s sex. Higher annuities are available for those that smoke and also health and lifestyle factors.

Other factors affecting the rate of your annuity will be the options that you choose such as escalating income, guarantees and spouse’s benefits. Generally speaking if you took a basic annuity with level income, no guarantee and no spouse’s benefit your income would be considerably higher than someone who chose to take an annuity increasing with RPI with a 10 year guarantee and 100% spouse’s benefit payable on death.

Annuity Rules Are The Biggest Misconception

An annuity is an important tool in the retirement sector, which allows you to draw your pension fund as regular income during retirement. Investing your hard earned life savings into an annuity is a very important decision indeed, and it is vital to shop around not only for the most suitable annuity type, but also for the most suitable annuity provider for you.

The biggest misconception when it comes to annuities is that one is required to set up an annuity with their pension provider. The truth is that thanks to the open market option, there is absolutely no need to be limited to your pension provider for an annuity. In fact, the Government is trying to encourage people to use the open market option and shop around for the best annuity deal before investing.

Annuity rates can vary very widely between providers. Also, the variety of annuity products available means that different annuities will have different rates even from a single provider. So a company that offers the best rates with one type of annuity may not necessarily do so with a different type of annuity.

The first step towards finding the right annuity, therefore, is to understand your own needs and find out what type of annuity works best for you. For instance, would you need a single life annuity, or a joint annuity? Would you rather have a guaranteed income for life, or invest in a higher risk investment linked annuity? Would you need a fixed annuity with fixed payments for life, or an escalating annuity? These are some of the questions that need to be answered before you can shop around for the best annuity quote.

Your pension provider is bound to offer a quote, and there is no reason why you should not consider this quote, as there is every possibility that it will not only be competitive but may even be better than the open market options. The point is not to limit your options, but to shop around and make an informed choice about this important step in life.

The Financial Services Authority has worked hard to ensure that pensioners have the right to exercise an open market option and shop around for annuity quotes. The FSA continues to encourage people to use this option and has also made it mandatory for your pension provider to remind you of this option while offering a quote. That you must purchase an annuity from your pension provider is a myth, but thankfully, one that is continuing to diminish rapidly.

Calculate your Annuity Quote Online!

Despite having the open market option, even today, many people continue to opt for the first annuity offer that is made to them by their pension provider. Market research shows that just by exploring the market and shopping around, you could be getting up to 46% more income from your annuity. So how do you find out how much you could get from an annuity scheme? Thanks to the leaps and bounds made in technology today, you can find out information about different types of annuity, as well as get instant annuity quotes right from the comfort of your home.

There are many websites that offer free and objective advice about different kinds of retirement investment products, including different types of annuities. You can read about how they work and understand how different annuities would work for you. You can also explore information provided by different annuities companies on their websites about their products and how they work.

Using all this information, you can decide what kind of annuity might work best for you. Of course, you will need actual Annuity Quotes to make the final decision, and until just a few years ago, this would have meant having to visit each company or at least make phone calls to different annuity providers for their quotes. Today, of course, you need to do no such thing. You can get annuity quotes instantly from different annuity providers simply by entering the required information in the online form.

Using the information you provide, usually about your gender, location, age, amount of investment, and other information like health and lifestyle data, the annuity company can calculate how much they could afford to pay you. If you want to find out the maximum income you could get from an annuity, you can use online annuity calculators, which are quick, easy and convenient.

Most companies as well as independent websites offer annuity quotes for free. Online pension calculators and other tools are also usually free, as is the information and other resources available on the websites. If you need help understanding a product or assistance with how to make the choice, an independent financial advisor could give you objective and impartial advice. IFAs generally charge a fee which can be either an upfront one off payment, or a commission based fee which is paid after you have made a decision. So, making the right choice of annuity has never been easier and more convenient.