The national Association of Pension Funds (NAPF) and the Pensions Institute (PI) have recently reported that many pension savers are not shopping around for the best annuity rates and are taking the default option from the pension provider.
As a consequence their income may be up to 30% less than it could have been and this £1bn is set to rise with the introduction of work based pensions later this year. Many people do not shop around for the best rates.
Here are a few ways that you can improve your annuity rate.
- Your lifestyle may improve the annuity you get. For example if you smoke or are overweight, some companies may offer you an increased rate.
- If you have a medical condition that is likely to shorten your life, this may also improve your annuity income. For example if you are diabetic or have had a heart attack the rates may be increased.
It is most important to use the ‘Open Maket Option’ to get the best possible terms. A financial adviser will be able to access the best terms available from all the companies in the market.
Many people accumulate various pensions during their working lives, so combining them altogether at retirement may help you improve your income. Around 80% of all pension funds are valued at less than £50,000, so getting the best rates can be a challenge. Small pension’s funds are clearly a problem at retirement. However if your pension fund(s) total less than £18,000 it may be possible to take the whole amount as a lump sum, subject to tax.
