There are a few annuity companies with competitive annuity rates. Legal and General annuity rates are good. Norwich Union annuities and Aegon Scottish Equitable annuities are good, especially for conventional annuity rates. LV=, MGM Advantage, Just Retirement, and Partnership have good annuity rates for enhanced annuities and impaired life annuities. Prudential and Friends Provident often come out well. Norwich Union, Prudential, and Legal and General are offering postcode annuity rates. Some even offer with profit annuities.

All a bit of a minefield. Read through this annuity website for full information.   

In 2007 annuity sales were £11 billion and income drawdown sales were £3 billion. By 2010, the annuity market alone is estimated to be standing at over £18 billion. Changes are required in the advice process. It is not simply the case of buying a pension annuity…things are evolving.

Clearly there is work in progress as both the product innovators and the adviser community move to a position where they can fully tap into and assimilate the potential of new retirement options. But it is interesting that the research findings show 78% of advisers explore impaired life products on behalf of their clients and for enhanced annuities the figure is 69% with variable annuities at 50% and fixed-term annuities at 41%.

A worry in the current economic climate is inflation. What proportion of clients are using inflation protection for their annuities, such as RPI-linked annuities. The single biggest area, nearly 70% of advisers, is in the 0-25% range, with 22% of advisers identifying the proportion as within the 26%-50% range.

We are living longer and longevity trends together with the clients’ own health profile has to feature in the strategic plan for future needs. 

It is certainly agreed by the majority that it is a question of educating and explaining to many clients that they cannot rely on the traditional cautious options of fixed interest, cash, and guaranteed annuities anymore.

This is about management of client expectations, about the resources needed to retire in both comfort and security, and greater willingness to use drawdown for those clients who are capable of being educated into making an informed judgement about the potential risks and rewards.

There is an emerging trend for people to delay buying their pension annuity and/or returning to work. Over a third of people (38%) over the state retirement age are effected. An online poll carried out earlier this year asked advisers to share their clients’ current experiences of retirement.

Over a third of clients (36%) stated they carried on working because they simply couldn’t afford to retire. As well as financial reasons it seems there are other reasons for continuing to work. A quarter of clients wanted to stay active and alert whilst nearly a fifth were bored in retirement.

Dave Lowe, Pensions Management Director, Zurich UK Life, commented: “As life expectancy continues to rise and the amount of time people spend in retirement increases, we are urging advisers to review their clients’ retirement planning. With more and more people expecting to be active in retirement, the need for financial advice has never been greater.”

In the North East, advisers reported that half (50%) of their clients had returned to work, whilst less than a third of clients (30%) of those based in the South West were returnees. As a nation, the Welsh are more likely to go back to work, with nearly half of clients (48%), returning to work compared to three out of ten Scots (31%) and a fifth of those from Northern Ireland (21%).

The research sought advisers’ views on how their clients are choosing to work beyond retirement age. Nearly four out of ten people (38%) have carried on working without actually retiring whilst a third of people (33%) have moved to a part time role with a further 14% becoming self employed as a consultant or similar.

Worryingly, despite this changing lifestyle, the research reveals that a fifth (20%) of financial advisers have not taken the opportunity to review their clients’ retirement planning as a result of clients returning to work in retirement.

Of those surveyed that have reviewed their clients’ retirement planning nearly four out of ten advisers (39%) have advised their clients to just take their tax free cash. More than a fifth (22%) advised their clients to take the income as well as the tax free cash, and more than a third (37%) recommend leaving any pension invested.

At retirement, you’ll probably buy a pension annuity which converts the lump sum from your pension fund into an income. You only get one chance to buy that annuity, and once you buy it, you’re committed for life. Most people buy a ‘level’ annuity, which produces the same income each year. 

An annuity which pays a level income might suit you well, but not necessarily. You might need to think carefully about how to make sure inflation does not erode the income you draw from your pension.

The most competitive annuity today will see a pension pot of £100,000 provide you with a level income of around £7,920 a year for men and £7,420 a year for women. Look at these figures:

If inflation increases by 2% each year, your pension would be worth just £4,779 in real terms in 2033. If annual inflation leapt further this year, to 5%, and stayed at that level for the next 25 years, your pension income would reduce even more dramatically from £7,920 to just £2,196 in real terms.

Consider an index-linked annuity. Let’s say you are a man with a £100,000 pension pot. For the first 12 years, you will receive a higher annual income from the level annuity than you would receive from the equivalent index-linked annuity. But then the situation is reversed. You would then start to receive a higher annual income from the index-linked annuity than from the equivalent level annuity. And, the index-linked annuity would prove better value over the long-term. After 25 years, the index-linked annuity would have paid out almost £209,000, while the level annuity (at £7,920) would only provide a total of £198,000 — or £11,000 less — over the same period.  

With inflationary fears and concerns with share prices retirees are seeing that their pension annuity and state pension are not enough; the 60-plus generation is taking to the bricks and mortar “lifeboat” that has propped up household finances all their lives.

Moneyfacts.co.uk reports that the number of equity release products for older people keen to spend some of the £730bn locked up in their homes has jumped nearly 50 per cent since Christmas.

The importance of equity release to an ageing UK population struggling with inadequate pensions has been heralded for a long time. Are we finally seeing the floodgates open?

The UK Equity Release Market Monitor from specialist financial advisor Key Retirement Solutions shows £390m released from bricks and mortar in the second quarter to June 30, in a total £680m for the year so far.

Unlike public sector workers on final salary pensions bankrolled by taxpayers, many private sector workers simply won’t have saved enough at 60 to rely on an oldstyle pension annuity to keep them comfortably in their dotage.