It’s disappointing, but not every retiree takes the best UK pension annuity rates at retirement. New chancellor George Osborne in his emergency Budget recently said the UK Government would review the requirement for retirement savers to have to buy an annuity by age 75; with an increase to 77 from next year. Those reaching retirement and considering their various options should remember that buying an annuity is something of a final decision: there is no turning back; you can’t change your mind.
An annuity is a lifelong contract between a retiree and an annuity provider. You exchange the pension savings you have accumulated during your working life for a certain income each month until you die, hopefully with the best pension annuity rates. If you want your spouse or partner to receive a pension if they outlive you, or if you would like your pension payment to rise each year to combat inflation, the starting figure will be lower.
Many people in their 60s do not buy an annuity at retirement for some very valid reasons. If you die a day after purchase, your beneficiaries do not have any claim to your remaining pension fund, this simply goes into the insurance company’s coffers. Therefore, if you want what is left in your pension fund to go to your children or charity after you and your spouse are gone, an annuity really isn’t an option for you. You could instead look at an unsecured pension, previously income drawdown. This is a much more flexible arrangement and deals with most of the objections to an annuity, including not having to rely on getting the best UK annuity rates. With this, you draw an income from your pension fund, within limits stipulated by the government, while your pension fund remains invested. another option is to pick and mix: you could convert part of your pension fund into an annuity, giving some security of income for life, while drawing a regular income from the remainder.out of your pension pot.
