I thought it important to give you information about pension annuities; how to get the best annuity rates for your particular set of circumstances. It’s important when you ask for an annuity quote that you have some idea of what you’re asking for if you want the best annuity rates to fit your requirements. Here’s a guide to help you. First, do you have a spouse or partner to consider? If yes, you should think about a joint life annuity or a guarantee period. Perhaps you suffer from some form of ill health. If yes, you could be eligible for higher enhanced annuity rates. Maybe you’re a regular smoker, and have been for 10 years. If you are, you could be eligible for higher smoker annuity rates. 

Maybe you’re a bit overweight, or perhaps you’re obese. If so, you could qualify for higher annuity rates. Do you consume alcohol on something of a regular basis? If you do, again you could qualify for higher annuity rates. Is your occupation of a more manual nature, perhaps you’ve a hazardous occupation in some way? If so, again you could qualify higher annuity rates. Perhaps you live in a ‘less wealthy’ area of the country, maybe somewhere around Glasgow (for example). If you do, postcode annuities could well provide you with the best pension annuity rates. Maybe you’re concerned about the ongoing effects of inflation on your income. If you are, you might want to consider an RPI linked annuity or an annuity with an escalating income of, say, 3% or 5%. Finally, do you want the best guaranteed income to be paid to you for the rest of your life? If you do, we can help you.

An annuity provides you with a regular income when you are old, and you could get even more with higher enhanced annuity rates. The annuity guarantees to pay you an ongoing retirement income until you die. You may live only a few years, or you might well live until you are 100, either way, the annuity will still pay you until you die. Mind you, if you do die somewhat prematurely, your annuity dies with you and once selected, the terms and options of the annuity can’t be altered, so you do need to get it right first time round.

If you are a statistically normal healthy person of average height and weight the annuity provider knows roughly when you might die. However, if you have ill health, you will probably die a little earlier. So, some companies will offer you higher annuity rates. The worse the state of your health, the shorter your anticipated life expectancy, and the higher the annuity income will be. You can get annuity incomes 30% higher with enhanced annuity rates, so it’s worth making the effort to find out if you qualify.

An often asked question about pension annuities; might UK pension annuity rates fall in the near future? Might UK annuity rates plumb new depths? After the recent Budget statement in June, there was a lot of noise about the Chancellor having abolished the need to buy an annuity by age 75. Although, strictly speaking, this ‘rule’ already no longer exists, the reality is that the options for flexibility about how retirement income can be taken are quite limited.The two main factors affecting the pricing of conventional annuity rates are the investment return on corporate bonds and how long the client is expected to live in retirement, together with how much to charge for that guarantee. These are all influenced by changes in the stockmarket and by regulation.

The implications of Solvency II are also already having an impact on UK pension annuity rates, and this, combined with increased longevity, means it’s possible that guaranteed pension annuities will become more expensive to buy in the future. But by how much? That is the quetion. To explain, Solvency II is forthcoming European legislation that includes the development of a risk-based financial framework for insurance companies, and one of the possible outcomes is that it may lead to lower pension annuity rates.

Some experts have suggested UK pension annuities rates may fall by between 10% and 20%, based on the picture that has emerged previously. The situation will continue to evolve over time, with lobbying and political debate in the UK and Europe, but at the moment the eventual outcomes are actually uncertain. While several different scenarios are being assessed, what is certain is that this debate will continue throughout 2010 and probably well into 2011. The date for implementation of Solvency II has now been put back a little to 1 January 2013. The change to annuity rates already appears to be partially factored into the annuity market, though there may be further to go.

Many people are getting higher UK pension annuity rates by using the open market option. Improvements in the open market option process could help retirees gain £3.3bn in extra retirement income by 2030, according to recent research by the Pensions Income Choice Association (PICA). The research, carried out across the South East of England, London and Manchester earlier this year asked groups with pension funds of between £5000-£100,000 to discuss their experiences of converting a pension into a retirement income, or an annuity. A majority of respondents who had already retired pointed to the administration, the volume of paperwork and use of jargon as key complicating factors in the annuity process.

Again, the majority of participants demonstrated little clear knowledge of the open market option and its impact on their important retirement income while those with smaller pension funds felt that shopping around was only appropriate for those with pension funds of at least £50,000. Participants were also asked to give feedback on whether the three step annuity process put forward by PICA in its Optimising Value in Retirement (OVR) report would improve the current process. This involves: a focus on the choices and decisions people face at retirement and the action they should take; production of a personalised statement containing sufficient information for people to use to obtain alternative annuity quotations; and a short communication requiring the member to inform the company/trustees how the pension fund should be applied. All communications sent in this annuity process are to be written in a clear, unbiased manner with as little jargon being used as possible.

The response to this new plan was overwhelmingly positive with respondents impressed by the increased clarity and ease along with the reduced use of complicated jargon. Those approaching and recently retired agreed the three step process has raised their overall awareness of the open market option and how it could be used to advantage. The consumer research conclusions were extremely positive to PICA’s proposals, commented PICA board member Steve Lowe. He added that by adopting the new shopping around three step process retirees could be accessing billions of pounds of additional retirement income and importantly getting access to a more appropriate range of retirement product and better UK annuity rates. PICA’s next step is to share the findings with policy makers to seek a change to the law by replacing the open market option we currently have with a new Pension Passport.

With many of us now living well into our 80′s, are standard annuity rates or enhanced annuity rates the best way to maximise your income from your pension. Many pension providers fail to highlight what your options actually are, which means many people end up making a decision that can have adverse effects on their financial well-being. You can buy a single life or joint life annuity, one that remains level throughout or increases with inflation, or in some cases an enhanced annuity, depending on your circumstances. However, once you’ve bought an annuity, you can’t change your mind.

You don’t have to buy an annuity from your current pension provider. Take advantage of the open-market option; compare annuity rates from other providers to see if you can get a better deal. Enhanced annuity rates could be available if you have a shorter life expectancy, and these are based on a number of factors: where you live, whether you’re a smoker, if you have any existing medical conditions, or if you’re obese. Approximately 40% of retirees could qualify for enhanced annuity rates, which would see them receive an average additional income of around 22%.