By now almost all of you will be used to getting a reminder through the post to renew your insurance and a convenient renewal price from your insurer. They usually tell you to simply call to renew your policy, or they may even have your credit card details and auto-renew for you. How nice of them.
Of course this convenience comes at a price and we all know that if you shop around you should be able to get a much better deal every year than the price quoted on the renewal letter. Exactly the same can be said for your annuity letter that comes through the door when your pension reaches its normal retirement date.
When you take out a pension you will set the date at which you want to retire. This is no big deal as you can change it any time, or push it back when you reach that age. However what happens when your pension provider thinks you are ready to ‘take your pension’ i.e. cash in your pension for an income for life (an annuity), is that they send you that all too convenient letter stating what income you will receive from your annuity.
For clarification, an annuity is the product that you pay your pension into and that pays you an income for life in return.
However, just like the insurance example above, if you just shop around you could get yourself a much, much better deal. The truth is that if you buy insurance for a year at a slightly higher price than you could have got it for, it is mildly annoying. If you settle for the annuity that your pension provider is offering without shopping around, you might be stuck with a lower level of income than you could have got for the rest of your life. That is because once you take out an annuity it cannot be changed or transferred.
It is therefore very, very important that you take advice or at the very least shop around for yourself to get the best annuity rates for your pension.
Of course an annuity is not the only option you have at retirement. You could take different forms of annuity or even elect to go into drawdown (which is a whole other subject but please feel free to call on 01604 211234 if you need to discuss).
Even if you decide to go for the annuity, you then need to choose very carefully what options you go for as, again, this will impact the amount of income you receive for the rest of your life. So things like, single life or joint life, guaranteed period or not, level or increasing income etc. They all matter.
So to get the very best annuity income you can please be very careful before making any decisions about your pension.