In the past, pensions did not come with too many options at retirement. For many, it was simply a matter of accepting what was provided (usually because the scheme operated with prescriptive rules and didn’t allow the retiree to exercise any choice).
With today’s pensions, there is a world of choice. For some, it will still make sense to take the benefits on offer from an employer’s scheme. But for an ever growing number, it is now up to ourselves to decide how we want our retirement benefits.
This choice is welcome in that it provides the opportunity to select options which offer the best terms or provide a different way to take your benefits. But, with choice can come complexity, so, it is important to take time to assess your options. Our expertise and personal service can help. So, if you are approaching retirement and want an expert on your side, just get in touch and we will guide you all the way.
Conventional annuities provide a guaranteed income in return for a capital payment. With pension annuities, the income is guaranteed to be provided throughout life. So, no matter how long you live, your annuity income will continue to be paid.
This guaranteed income is attractive to many people and conventional annuities are still the most popular choice for UK retirees. The contract terms are fixed at the outset and cannot be changed. Aside from any other considerations, this means that it is vital to shop around for the best deal before you buy. Charles Derby clients benefit from a research service, so this work is taken care for them
. The annuity rates on offer (which determine the starting income) vary a lot between providers. And, with niche providers now providing enhanced rates for certain groups of people, the difference in rates is getting wider.
Colin is aged 60 and wants to buy a conventional annuity. He has saved a pension fund of £100,000, has no dependents and is a smoker. Most providers will treat Colin the same as non-smokers, but, some providers will pay higher incomes due to shorter life expectancy.
Based on buying a level income ‘single life’ annuity on 25th
October 2010, the Financial Services Authority’s rate comparison shows the following:
AXA - Monthly income of £401
LV - Monthly income of £559
Over 10 years, the difference will be £18,960. Over 20 years, the difference is a staggering £37,920.
This example does not seek to portray AXA as offering poor rates (in this example, their rate was the 8th
best shown in the comparison tables, and many other providers would pay even worse rates). It is a single example and providers are not competitive on all examples.
The example is provided to highlight the need to get the best deal possible. A single phone call to us to could make a huge difference, so, before you take benefits from your pension, gives us a try.
Some of the advantages of conventional annuities are also their pitfalls. For example, it is only because changes cannot be made that guaranteed terms can be offered. But, because changes cannot be made, conventional annuities do not provide flexibility. With retirement now lasting longer and longer and with changing demands to cater for, there has been a significant growth in flexible solutions.
Flexible retirement products provide the opportunity for continuing investment growth. They can be used to pay out any tax-free lump sum available and yet defer income. Alternatively, income can be drawn directly from your pension fund. They can also be used to provide death benefits to your dependents.
There is so much choice in fact that this page would not be long enough to cover it all! But rest assured, our retirement service can assess all suitable options and provide clear information on any recommendations. And, as these flexible solutions allow changes and can be adapted over time, we will provide an ongoing service to make sure you continue to have the most appropriate solution and have access to the best terms at all times.