Buying the right pension annuity is crucial
When it comes to the time to buy your pension annuity at retirement-when you turn your pension fund into an income for the rest of your life-you really have to be careful and make the right decision. Getting the right pension annuity rate with the right options is crucial; your decision remains with you for the rest of your life. It’s also a one-way journey - once you’ve signed up to your pension annuity and handed over funds, you can’t change your mind or have your money back.
60 % of pension annuity buyers give it less thought than a mobile phone contract. They just agree to whatever their pension fund provider puts in front of them. Research by the Financial Services Authority (FSA), reveals a 20% gap between the best and worst pension annuities. So spend time finding what’s right for you - you could spend the rest of your life regretting a wrong decision.
When you approach retirement your pension provider will invite you to convert savings into a regular income for life at its own pension annuity rates. But these are unlikely to be table topping, so ignore this. Instead, insist on the “open market option” (OMO) which means you can source your pension annuity from the best provider on the market. This costs nothing to use and could net big increases for the rest of your life.
It’s also very important to shop around if your life expectancy is likely to be curtailed. 40 % of all pension annuity buyers could get more if they opted for an impaired life annuity plan or an enhanced annuity plan, yet only 8% have done so.
