Next: Does you have to buy a pension annuity when you come to retire? You don’t have to buy a pension annuity with your pension fund. There are other, more flexible retirement solutions available to you, such as income drawdown, guaranteed drawdown, an investment linked annuity, or a fixed term annuity. These various products should be explored, particularly if you have a larger pension fund, and are looking for greater flexibility with your retirement planning.

Next: What types of pension annuities are available? Pension annuities do vary according to your circumstances. Typically, if you’re in good health you should buy a conventional annuity. If you have certain lifestyle or medical conditions you should buy an enhanced annuity which will pay you a higher level of income. Both are classed as lifetime annuities in that they pay an income for the rest of your life. However, there are also other types of pension annuities to take into consideration which aren’t lifetime annuities, such as a fixed term annuity.

Next: Should you take your pension annuity – your retirement income - from your existing pension provider? You have the right to utilise your open market option at retirement and transfer your hard earned pension fund to another pension company if you can find a better deal for your particular circumstances. You need to understand exactly what type of annuity income will best suit you, especially if you have any lifestyle or medical conditions.

As part of the overall review and the decision to get involved in pension annuities, Scottish Widows has decided to withdraw from the offshore investment bond market by closing CMI to new business from 30th March this year. A spokesperson for Scottish Widows said it would be maintaining its offices in the Isle of Man, where CMI is actually based, and added that it is contacting clients to reassure them there will be no changes to their investments or service levels. Currently there are no plans to sell CMI.

Toby Strauss, of Lloyds Banking Group, said that the IFA market is a core business channel for them and that they will be working closely with IFAs to ensure they not only create a new and enhanced product range but also deliver these new products in a way that caters for clients and IFAs needs in what is a rapidly changing at-retirement market. He added that the proposed introduction of the retail distribution review (RDR) in 2013 will be a major challenge for many IFAs, and he wants to make sure Scottish Widows remains at the forefront of having innovative, quality products to offer.

He then went on to state that they are committed to providing clients with products that reflect their changing requirements and with people living longer nowadays and rapid growth in demand for pension annuities they feel this is the right time to signal their move into this growing market, and that enhancing their offering to the IFA market at the same time as creating new tailored products to be sold through Lloyds Banking Group’s various other retail business demonstrates their ongoing commitment to create better-value products and services for clients.

It will be very interesting to see what new ideas they come up with in what has become quite a complex market, with various different retirement solutions already available.

Head of mortality research – an interesting title – Ross Matthews, stated that if last years fall in mortality rates actually continued, a man of 65 retiring today could anticipate living to 91, three years more than the typical currently anticipated age of 88. And, a 45-year-old would expect to live to 95, and that’s seven years longer than today. This equates to an uplift of up to 15% on pension scheme arrangement liabilities, potentially driving scheme deficits by as much as a whopping 50%. But others warned that death rates are volatile and can change year to year.

What’s this got to do with annuity rates? Well, if average life expectancy were to increase as suggested above, then a pension annuity would have to pay an income for that much longer. If that were to be the case then the income payable would be less per month – because it’s having to stretch out overall for that much longer, if you see what I mean. And, if the income is lower, then the calculation of it is lower. As annuity income equals pension fund multiplied by annuity rate, then annuity rates will fall to produce that lower income.

The ABI had proposed to create a fresh system whereby insurance companies no longer sent pension annuity quotes unsolicited to investors heading for their retirement, and that they better explained the shopping around process – utilising the valuable open market option. In its response published today (February 6th), the NAPF said the new system or code must, at a minimum, give pension scheme members a list of what they call “specialist annuity brokers” when giving shopping around information, including brokers which deal with smaller pension funds pots. Ideally, insurance companies should actively direct their customers straight to an annuity advice service themselves, the NAPF said.

The response to the ABI’s pension annuity advice consultation came after the NAPF published a report which suggested if the pension industry fails to improve open market option access the government must step into the breach and create a nationalised annuity service. Now I have to say that that’s unlikely to happen as there are sufficient numbers of independent annuity services well capable of doing the work.

There must be a simple way of encouraging pension investors to shop around for pension annuity advice as they approach their retirement. Less paperwork, but more focussed, would probably help a lot, with a warning saying something like…’The pension fund you’ve been investing in over the years comes up to maturity on the xx/xxxx. It’s important you realise that any decisions you make regarding using this fund to provide you with your retirement income are important, and we suggest you seek advice as to the best route to go down. If you seek advice you could be that much better off in your retirement, and this is especially important if you have any medical or lifestyle conditions, as this could make you eligible for a higher retirement income.’

The process for choosing from the various pension annuities available to you is complicated and the majority of retirees still go for the “default” option by taking the pension annuity on offer from their existing pension provider, and this failure to shop around using the open market option to find a better deal can wipe as much as 30% off their annual retirement income, and in some cases this could be up to 50%, the NAPF argues.

The NAPF said most individuals retired with pension funds worth less than £50,000, which was not enough for financial advisers to make a profit by providing proper advice on which pension annuity should be bought. However, it added that few people understood enough to successfully chose a pension annuity themselves. Interestingly, those people who were able to shop around might have found the best deals were just not advertised. The NAPF claims that it is nigh on impossible to find a specialist financial adviser who covers the whole at-retirement market and who is willing to help those individuals with smaller pension funds.

The good news is that we can help you get a better income from a pension annuity. We can compare annuity rates from all companies in an effort to secure you a better deal when you retire. We can make sure your open market option works for you. There are a number of pension annuities to choose from and we’ll help you choose the one that’s best for your particular circumstances.

There are nine enhanced annuity companies in the market, and your details will need to be submitted to all of them in order to be confident you’ll get the best annuity rates, as what each offers will differ. However, Ms Oxenham says that we shouldn’t forget the data protection issues involved in providing this sensitive personal information. She suggests that if you’re in good health you can check the standard annuity rates offered by various providers through an annuity quotation portal such as provided by Assureweb, Avelo Exchange or perhaps Annuity Marketing Services (AMS), but this can’t be done if you might qualify for an enhanced annuity due to your lifestyle or the state of your health.

To see the effects of shopping around, Nigel Barlow, of Partnership, said indicative pension annuity rates are available from a variety of sources in the press or online. Andrew Tully, pensions manager for MGM Advantage, said that the Money Advice Service also has annuity comparison tables, although these don’t include varieties such as enhanced annuities or flexible annuities. Other online comparison sites – like Moneysupermarket – also have comparisons but these don’t help individuals decide what shape of pension annuity they should choose (for example, a guarantee period, level or increasing income, spouse’s benefits, etc), which is also an important decision.

The best way to get the best deal and the right pension annuity at retirement is to shop around using the open market option, but don’t do it yourself. Let retirement specialists do it for you. They can advise you on the most appropriate type of pension annuity and the right options, and they can also advise you on any alternative retirement solutions that might be appropriate for you to consider. That’s the service we offer you through this website.

Although recent CPI inflation has fallen by a slightly lower 4.2%, households where the main occupant is 65 – 74 need an extra whopping £3.27bn in aggregate to maintain the same standard of living, and those householders aged 75 + need a staggering £2.15bn in total.

The MGM report also found a sharp disparity between the leading enhanced annuity rates and the bottom standard rates. For those people aged 65 + with a £50,000 pension fund, the difference is a massive 55.2% for males and 52.2% for females. According to MGM, this quite startling statistic emphasised the importance of using the open market option at retirement and shopping around. Aston Goodey, of MGM Advantage, stated that this research’s findings are surprising and will put even more pressure financially on those people who are already retired or approaching their retirement. With the ongoing economic uncertainty, the long term outlook for conventional annuity rates and enhanced annuity rates is difficult to ascertain, and this makes shopping around utilising the important open market option even more crucial than ever.

I suggest that when people are nearing their retirement they look at pension annuity rates in the same way as car insurance. With car insurance you would shop around for a cheaper premium. The same goes for pension annuity rates, except here you’re looking out for whichever company will pay you the highest retirement income based on your particular set of circumstances. Shop around – you know it makes sense – and it could make you that much better off.

The annuity provider has stated that while it has rebranded, the new brand Primetime Retirement retains all of the core values that existed with Living Time, including its goal of bringing greater product innovation, more choice and greater flexibility to retirees. It is expected that the new product will be launched in the first quarter of this year. Lerche-Thomsen states that the new annuity would be something completely different to what is currently available. He also distanced himself from the idea of another fixed term annuity product, suggesting that there were already big household names in that market.

The new product will be ‘innovative’ as well as ‘market changing’. Lerche-Thomsen, of Living Time, states that he has been known in the past for his innovative ideas and that he wants to continue this. Living Time added that it will look at the competitive lifetime annuity market and see if it can actually improve it and offer a better type of product for consumers. However, Lerche-Thomsen has stated that Living Time will continue to promote the cause of the Open Market Option (OMO) and shopping around for a better deal at retirement, as part of a wider industry move.

Living Time has been working on championing and promoting the OMO campaign, most recently turning its attention to insurance companies improving their internal shopping around procedures. The campaign is aiming to associate with three insurance companies to draft a new set of standards for the pensions industry, to improve customer awareness and the general utilisation of the OMO. Living Time actually created the first fixed term annuity contract at the beginning of 2008, with four annuity providers now making up the market.

It will be interesting to see just what they come up with.

With an enhanced annuity, as opposed to an impaired life annuity, it should be noted that less serious medical conditions including the likes of diabetes, high cholesterol, and being overweight (or obese) can in some cases also make you eligible for a higher annuity rate. Each case is considered on its own merits by an underwriter. Should you be morbidly obese and at the top end of a BMI calculator then you’re probably going to get a greater increase in retirement income compared with someone who is simply mildly overweight.

In order to benefit from impaired life annuity rates or indeed any other enhanced annuity rates you may have to supply details of your medical records from your hospital or general practitioner (GP). You may also have to have a medical examination in order to verify the scenario regarding your heath status. The first task you have is to complete a standardised medical questionnaire which can then be sent off to an annuity provider for their consideration.

There are examples of scenarios for higher impaired life annuity rates on our enhanced annuity rates page, and it is important to note that there are various factors that underwriters will take into consideration when looking at your application, namely: how severe the medical condition(s) is, when you were diagnosed – recently or in the past, precise dosage levels of any prescription medication and the frequency taken, and the history of the medical condition.

Basically, what’s been looked at is the precise nature of the medical condition(s) to assess your particular life expectancy. The more serious the medical condition(s) the shorter the life expectancy, and the higher the annuity rates. The higher the annuity rates, the higher your retirement income.

Mr. & Mrs. G. are grateful they used their open market option and shopped around for the best annuity rates when it came to their retirement. He was initially offered through Skandia an annuity with Legal & General. However, because he has type 2 diabetes as well as hypertension, he got a 17% boost to his annuity income with Partnership. We can help you if you’re in a similar situation.

Unfortunately, most women lose out with pension annuities if left on their own. They risk being short-changed in their retirement because of the annuity selections their husbands and partners choose. Around 66% of women rely on their husband or partner’s annuity income in retirement, according to recent research from Phoenix, and, as many women have only pretty modest State and private pension plans in their own right, leaving them open to a drop in retirement income if their husband or partner dies prematurely can be very costly. Indeed, Phoenix says only about 40% of its customers select an annuity that pays any annuity income for a widow or widower.

In fact, just over 30% of annuity buyers picked a single-life pension annuity, despite saying that providing an ongoing income for their partner was actually important. Worryingly, around 40% of pensioners thought they had a pension annuity that provided for their spouse, but they didn’t – they had a  single-life policy. Alan Bradbury, of Phoenix, suggests that pension savers quite naturally want the biggest annuity income they can afford and providing a pension for two people will cost more – but not by that much, with the typical income on a joint annuity arrangement being around 10% less than on a single annuity.

The one financial transaction you benefit from if you smoke is a pension annuity. This is because your anticipated life expectancy is lower. Yet only about a third of those individuals who are eligible for an enhanced annuity or an impaired life annuity actually get one. An enhanced annuity can considerably boost annual annuity income, and therefore it’s something that should be considered if you have any health conditions or lifestyle conditions, such as smoking, blood pressure, or cholesterol.