Monthly Archives: November 2009

Get the best pension annuity rates with UK postcode pension annuities

Did you know some people get the best pension annuity rates with UK postcode pension annuities. Look at a small town in Scotland, Kilbirnie, with a population of around 8,000, which has a lot of undertakers. Three firms of funeral directors are on the Main Street, outnumbering the banks and grocery shops. By cruel coincidence the Scottish town holds an unenviable title. Actuarial experts from leading pension consultant Watson Wyatt rate it as the town with the shortest average life expectancy in retirement in Britain. Apparently, a 65-year-old man in Kilbirnie will live on average a further 17 years in retirement, and that’s three less than the national average and eight less than people in places with the ‘longer-living’ postcodes.

An example is Montacute, in Somerset, which has the UK’s longest-lived residents, and someone aged 65 in Kilbirnie is more than twice as likely to die within the next year as is a person in one of the healthiest towns, such as Montacute. This is actually becoming increasingly important in people’s financial lives. Insurance compainies (annuity providers) are now increasingly using postcodes to help work out how much pension income to pay when people retire. While the average lifespan has increased in recent years, there are big regional differences. Matthew Edwards, of Watson Wyatt, analysed three million pension records to produce the data, and he stated that if you are running a company pension, you want to know about the mortality trends where employees live.

Another example, Kilbirnie, near Glasgow. Once home to an important steelworks while the huge mills in the town spun flax for fishing nets. But the steelworks closed in the early 80′s and have been demolished while the flax mills stand derelict now. Despite high unemployment and issues with both alcohol and drug abuse in the town, some residents say it does not feel as though it is an unhealthy place to live. But it is when it comes to postcode annuities

A 450-mile drive south from Kilbirnie is the aforementioned village of Montacute, which has the nation’s longest-living residents, according to Watson Wyatt. A man of 65 years of age here can expect to live 25 more years in retirement. Darren Dicks, head of pension annuities for Aviva, says that the differences in life expectancy are down to wealth principally. Where you live is a good measure for education, lifestyle and occupation, which all have quite an influence how long a person is likely to live.

Eligible for enhanced annuity rates or impaired life annuity rates?

Do you know if you’re eligible for enhanced annuity rates or impaired life annuity rates? Rates that can really boost your pension annuity income. For all the criticism of the ways in which poor value pension annuities are foisted on unsuspecting retirees, we are yet to see a legal challenge on the matter. Interesting, though, because a successful claim might open the floodgates for compensation for misguided pension annuity purchases for hundreds of thousands of retirees. Picture this: a retiree successfully argues before the ombudsman that their pension plan provider failed to communicate the importance and the opportunity of taking the open market option (OMO). Or a disgruntled retiree decides that scheme trustees failed to highlight the potential retirement income uplift his kidney transplant entitled him to.

Apparently, the pensions ombudsman Tony King, when asked how he has dealt with claims relating to individuals given unsuitable pension annuities, said that he has never come across a single case. Not one retiree has claimed that he or she could have had an enhanced annuity or an impaired life annuity instead of the conventional one they got. Maybe no one has claimed to date because those same people who are unlikely to know their rights when it comes to taking state benefits are even less likely to be too sure of what they can do when they retire. But it would take just one individual from a price comparison website to find an unhealthy recently retired person and help them make a claim to the pensions ombudsman. There is really no guarantee such a claim would work, but for an average pension fund of around £30,000, a retirement income uplift of a third could mean compensation in the region of £10,000, making it worth the effort. 

The open market option; getting the best UK pension annuity rates

The open market option; getting the best UK pension annuity rates, is proving to be a communications challenge in the pension annuity arena. We need to help people engage much better with their important  retirement decisions. Agencies have been lobbied, the likes of the Association of British Insurers (ABI) and the Department of Work and Pensions (DWP), to see how they can mandate engagement with the open market option (OMO) and other parts of the market earlier such as perhaps at 45-50 years of age. Earlier engagement in the retirement planning process would do much to improve many people’s prospects of an improved retirement. Origen’s technical manager Bob Perkins says helping people to appreciate that they need to save more in their 40′s can have a massive impact on their retirement fund which in turn will open up fresh options to them when it comes to taking their retirement income.

He suggested that as a business Origen deal with all parts of the retirement spectrum and they are working hard to offer something for everyone. What he finds staggering was that out of 450,000 annuities purchased last year, over 400,000 were with pension funds of less than £50,000. That is very important to take on board and we need to communicate with people now who don’t understand how the pensions market works. We have to tell them they need to commit if they are going to save a decent amount in their pension fund, to buy an annuity with on the best UK annuity rates they can. 

Open market option, PICA, and finding the best UK pension annuity rates

The open market option, PICA, and finding the best UK pension annuity rates, is an important development in the UK pension and annuity market. The emergence of the Pension Income Choice Association (shortened to PICA) has been well received by an industry desperate to help retirees become more engaged with their at-retirement options. While there have been several (insurance company) provider-led initiatives aimed at raising awareness of the open market option (shortened to OMO), take up rates have remain stubbornly stable around the 40% level for many years.

In their recently launched report Optimising Value in Retirement PICA put together a series of recommendations aimed at making retirees more aware of the options available to them. These included making OMO the default option for anyone deciding to take a retirement income, helping them to get better UK annuity rates. The report also called for a register of financial advisers to be set up to provide advice to those with pension pots of less than £50,000. Apparently, early responses to the report has been really good and we’ve seen Steve Webb of the Lib Dems  coming out in support of its recommendations, commented PICA interim-chairman Tom McPhail, of Hargreaves Lansdown.

There have been various meetings with politicians and industry regulators with positive feedback. PICA have been challenged on some of the things they’ve put forward but it’s all been constructive and made them refine their way of thinking. Their key position is to make shopping around using the OMO the default process, as the current system doesn’t work. PICA have met some resistance against those who don’t feel that we should force people to make a choice but even if they don’t make a decision they’ve still made the choice to stay with their pension provider. PICA want to make the decision making process more informed.

Help needed to get the UK best pension annuity rates

In the UK, there is help needed to get the UK best pension annuity rates for the hundreds of thousands of people retiring with a pension annuity each year.We have had the choice of single life and joint life annuities, level, escalating, or inflation proofed for many years now but in addition we now have temporary annuities, annuities with value protection, post code, variable, enhanced annuities and impaired annuities. This product evolution has led to a new phenomenon which is a trend towards individual annuity pricing. We are moving into a time where there is no longer a standard annuity rate. Every retiree is priced on the basis of their own profile. 

In effect, unless a retiree can show a good reason why they should qualify for some kind of enhancement, they will be offered relatively low UK annuity rates. Therefore the importance of shopping around utilising the open market option (OMO) for your retirement income becomes that more crucial. The differences in annuity rates are substantial, with retirees able to secure for themselves enhancements of more than 20% in some cases. The problem also has an impact on lower earners, and high earners are more likely to receive financial advice and to get the best solution for them in retirement.

Unfortunately the proportion of personal pension type pension investors who do shop around using the OMO is stuck below 40%. In spite of the efforts of the Treasury, the department for work and pensions (DWP), the Association of British Insurers (ABI), the Financial Services Authority (FSA), the Pensions Regulator, The Pensions Advisory Service (TPAS) and all the media coverage from journalists and financial advisers, the majority of retirees are still not shopping around, and this must change.

A proposal on the table is that we move to a three-stage process. Initially, about six months before retirement, investors should be sent an informative wake-up pack which explains their options and gives guidance on what to consider and what financial solutions might be appropriate to various situations, as well as sources of additional information. Then around three months before anticipated retirement, investors are sent a pre-retirement statement, partially completed by their existing pension provider. This statement would be a simple one-page document including all the key information for shopping around with the OMO: pension fund value, pension commencement lump-sum entitlement (tax-free cash), as well as boxes for the investor to complete with information on their history and around three very simple medical questions which could be used to identify eligibility for enhanced annuity rates. Finally, just a few weeks before actual retirement, the pension provider would write asking for confirmation of what choices the retiree  would like to make. I think this is a step in the right direction, removing the default option away from the current pension company providing the annuity.

Smaller pension funds and getting the best pension annuity rates

Small pension funds and getting the best pension annuity rates is becoming a concern in the pension and annuity industry. While increasing uptake of the open market option (OMO) will do a lot to improve many people’s retirement income there are concerns for smaller funds, especially when you consider that the average pension fund in the UK still stands at about £27,000 and many financial advisers are not able to transact such business on a cost effective basis. Either there just isn’t enough commission or the retiree can not afford to pay a reasonable fee for the advice required.

As a result, many retirees have little choice but to stay with their pension provider for their annuity, and very often not with the best annuity rates, far from it. One answer could be to establish a register of advisers who are willing to transact these smaller funds. This could be an important step forward. Aston Goodey, from leading enhanced annuity provider, MGM Advantage, says that the key thing to recognise is that there are now financial advisers willing to go down to the minimum, adding that one objection to the OMO has been who will service the small funds, but MGM are now seeing a number of advisers developing systems that allow much smaller funds to be broked at a profit. They can now see new avenues developing and are seeing the market evolving quickly as retirees are alerted to the fact there are advisers who will deal with them.

Enhanced annuity and impaired life annuity rates provider makes appointment

Enhanced annuity and impaired life annuity rates provider makes appointment. Partnership Assurance have appointed David Harvey to spearhead their enhanced and impaired life annuity drive in workplace annuities. He will take on the responsibilities of director of corporate pensions development, to (logically) develop the company’s presence in the corporate pensions arena. Harvey, joining from Axa Corporate Benefits, where he was head of corporate sales for the UK, will be responsible for promoting new pension annuity and de-risking solutions in the UK corporate pensions arena.

Prior to his time at Axa Harvey was involved in developing AMP’s corporate pensions business from a standing start over a 4 year period. He also spent 10 years as a business development manager in L & G’s  corporate pensions division. Partnership managing director, Andrew Megson, says that they are delighted that David is joining them at what is a very exciting stage of their development. David’s in-depth knowledge, experience of the pensions market and the strong relationships he has developed throughout his career will be key factors in helping Partnership achieve its strategic goals in maximising opportunities in the enhanced annuity and impaired life annuity areas in the corporate pensions market.

UK pension annuity rates at record lows

Unfortunately, we are currently seeing UK pension annuity rates at record lows. The opportunity of getting a good retirement income have taken a bit of a blow of late as news indicates that pension annuity rates have hit an all time low. A pension annuity is effectively a guaranteed income for life paid by an insurance company (the annuity provider) and is bought with the proceeds of a pension fund from an employer’s pension scheme or a personal pension plan. Naturally the higher the value of the pension fund the higher the retirement income, though not as high as previously thanks to these lower annuity rates.

Research out from Investment Life & Pensions Moneyfacts (ILPM) has revealed recently that after holding firm during the summer months, annuity rates have fallen steadily over the last couple of months. The average rate for a male aged 65 buying a level without guarantee annuity (based on a £10,000 fund) has decreased by 3.3% since September, whilst the equivalent female annuity rate has seen a 3.6% reduction.

The latest reductions in pension annuity rates mean that the average male rate is down by around 10.5% compared with twelve months ago, whilst female rates haven fallen by around 10.9%. Over the last 15 years the drop is even more severe, with male rates now 43% lower and female rates 40% lower. Commenting, Richard Eagling, editor of ILPM, said that given that the stockmarket recovery has recently increased the size of many pension funds, it is disappointing that falling pension annuity rates have had an adverse impact on the retirement income being realised. Part of the problem is the low gilt yields that we are still witnessing, which are still well below last year’s levels.

Since the purchase of a pension annuity is a one-off transaction, it is vital that retirees shop around for the best deal for their money. Although under the Open Market Option (OMO), a retiree is not required to purchase an annuity from the pension provider with whom they made their pension savings, in reality, relatively few opt to move their money and find a better deal elsewhere. Richard Eagling added that with few signs that the recent round of UK annuity rates reductions is at an end, the priority must be to maximise the level of retirement income received, and, for most retirees this will only be achieved by shopping around to obtain the best annuity rates and exploring the open market option. The difference between the highest and lowest annuity rates can be as much as 13%. The potential uplift for those in ill health or who smoke and therefore qualify for an enhanced annuity is even higher.

Brits told to use the open market option for the best UK pension annuity rates

Shop around for those pension annuities. Brits told to use the open market option for the best UK pension annuity rates. Those individuals reaching retirement age in the UK should look at all the retirement options available to them when it comes to turning their pension fund into an annuity. This message comes from leading enhanced annuity rates provider, MGM Advantage, which conducted recent research into the behaviour of Brits when making some higher priced purchases. Their research did come up with some interesting findings.

It found that 49% of those responding to their various questions said they shop around when considering a house, car, holiday, or furniture purchase, but only 11% use the open market option for best UK annuity rates for a pension annuity. The report also showed that a woman with £50,000 worth of pension fund savings who lives 20 years after her retirement could boost her annual income by an extra £11,000 if she compared rates from different annuity providers. Aston Goodey, director of sales at MGM Advantage, said that’s it’s a real concern that people are so comfortable haggling over the price of a car or new sofa, or something of that ilk, but so reluctant to shop around or negotiate over the rates on offer for a pension annuity, especially considering the long term importance of getting the best annuity rates. 

Give your child a £1m pension fund to spend on the best UK annuity rates

Make your child a millionaire. Give your child a £1m pension fund to spend on the best UK annuity rates when they reach their retirement annuity buying age. Children do cost a small fortune to run, so to speak, and the costs do seem to go on forever. Therefore, saving for a child’s retirement more than fifty to sixty years into the future is actually likely to be the last thing on the mind of a parent or even a grandparent, but it actually makes more financial sense than you might think. 

Figures from pensions company Clerical Medical show that £300 saved each month for a young child by a parent or grandparent between birth and the age of only 16 could provide a massive pension pot of around £1.2 million by the time the child retires at the ripe old age of 55, without the child ever having put in a penny during their working life (annual growth of 6%). At current UK annuity rates, this would provide a retirement income of nearly £70,000 per year from the age of 55, or more than £80,000 per year from the age of 65.

Pension reforms back in 2001 introduced the stakeholder pension, and, interestingly, this type of pension allows people under the age of 75 to make income-related pension savings both flexibly and cheaply. The stakeholder plan also allows those with only a small income, or maybe no income at all, to pay up to £3,600 each year into a scheme without reference to their annual earnings. This has opened the way for higher earners to make regular payments into a pension plan on behalf of non-earning family members who since the reforms can, for the first time in history, benefit from pension fund savings in their own right.

A further benefit of these reforms is that these contributions are made net of tax, whether the pension account holder has taxable earnings or not. So, someone paying in the maximum £3,600 per year that is permitted without looking at earnings would actually hand over to the plan just £2,880, with the extra £720 being paid into the plan by the government. This means that fully funding a stakeholder pension plan for a child with no taxable income would cost a parent or grandparent only £240 a month. 

Bob Fraser, an adviser at wealth manager Towry Law, says that contributions made during the first 18 years of a child’s life could easily end up being worth more than equivalent contributions paid during the 42 years from ages 18 to 60. Towry Law figures show that ongoing contributions of £3,600 per year between birth and the age of 18 and then ceased would create a pension fund at age 60 of £1.31m, while saving from the age of 18 to 60 would create a pension fund of less than half that at around £660,000, assuming a growth rate of 7%. And that’s a lot of  money to spend on the then best UK pension annuity rates.

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