What does the future hold for pension income?
Falling annuity rates leads to difficult decisions
With an air of uncertainty surrounding annuities, declining rates have left those approaching retirement with a difficult decision to make for the future.
And if you’re considering accessing your pension soon, you may be asking yourself: How can I secure the best possible pension income, due to it being uncertain as to whether rates will continue to fall or stabilise?
The resulting drop in annuity rates, since Brexit, means that an annuity could now generate a lower pension income than it previously would have this year. If the decline continues, you may wish to consider looking towards purchasing your annuity now, and secure your rate if thinking about retiring in the coming years.
Typically, an annuity has been the most popular pension-income option chosen by those approaching retirement, because an annuity is still the only way to turn your pension savings into a regular, guaranteed income for life - for you and, if required, a partner.
Many people choose an annuity because their income is confirmed upfront, and will continue to be paid to you regardless of how long you live. Therefore the longer you live, the more value you are likely to secure from an annuity; which for many provides peace of mind, as they know their pension income won’t run out before they pass away.
However, it’s worth noting that the annuity rate offered by your existing provider may not be the best annuity rate from the market, so it is vital you shop around to get the most income from your annuity. Comparing the whole of the annuity market through regulated, independent and impartial companies, such as Age Partnership, could provide you with access to higher annuity rates and therefore increased income for life.
What’s more, certain health and lifestyle factors could help you qualify for up to 40% more
pension income1 through an enhanced annuity, as these factors aren’t usually considered in quotes provided by your current provider.
Though not an exhaustive list by any means, some examples of conditions or factors that may qualify you for an enhanced annuity are:
• Smoking • Diabetes • High blood pressure • Heart disease • Cancer • Kidney failure
Once you’ve obtained an annuity quote, you may wish to consider securing your annuity income now as the terms are only typically guaranteed for 2-4 weeks. If you require more time to decide what to do, you’d need a re-quote and this rate may vary from the rate you were previously offered. Therefore requesting your quote now could give you peace of mind in this uncertain post-referendum market. However if you’ve already purchased an annuity you won’t be affected by future annuity rate changes.
Talking to an experienced specialist or financial advisor is very important before you make your decision. Companies like Age Partnership, who are impartial, can help take the stress and worry out of the process, too.
Should you be interested in an annuity, they can provide all the information you need to proceed. Alternatively, should you wish to retain flexibility around changing annuity rates they can discuss your requirements and offer a range of different retirement solutions.
Research by the Money Advice Service shows that the usual increase based on health and lifestyle factors is up to 40%.