What about taking your pension annuity at 60? How are UK annuity rates going to be at that age? Is taking a pension annuity early a wise thing to do? This article considers a scenario where an individual is about to reach age 60 and wondering whether he has to take his pension at 60, or if he can delay this decision. And indeed, what are the options? Some time ago, many in the pensions industry advised investors not to touch their pension fund until it was absolutely necessary. The main reason for this was that these funds grew tax-free and the older you were the bigger annuity you could buy.
It’s probably fair, and unfortunate, to suggest that some pension funds have not shown any growth in recent years. And also it needs to be remembered that UK annuity rates do not always increase as one gets older. Many older pension plans contain guaranteed annuity rates (GAR). This means there is a contractual obligation on the insurance company to pay you a significantly greater annuity income than you could buy on the open market. Indeed, one of the reasons Equitable Life got into so much financial trouble was that it apparently offered guaranteed annuity rates at all retirement ages in all situations. So this needs to be looked at, although not all policies work this way.
As you can see, there are circumstances where you should always review pension plans as they approach their stated pre-set normal retirement date. In fact, all investors should really review their pension contracts as soon as possible as it’s crucial to ensure the investments are in line with your risk profile. No one really knows what will happen to pension annuity rates. Over the last 15 years, they have fallen from around 15% to 6%. The current economic climate is very worrying. There is a belief that interest rates might fall and if they do, you can expect pension annuity rates to worsen.
