When the groundbreaking pension changes were introduced in April 2015, many experts believed that they signalled the demise of the annuity. Media attention focused on the fact that under the changes no-one would be forced to buy an annuity. So it was hardly surprising that sales of annuities fell markedly in the following months.
However, since then the economic scene has changed. Volatility in stock markets convinced some retirees that the certainty of income an annuity provides can be a good way to ensure that they had sufficient secure income to cover their basic living costs.
WHAT ANNUITIES OFFER
One of the main benefits that annuities provide is security. What you get in exchange for the purchase price is a pre-agreed, fixed payment for life. As long as you live, you will still receive an income. However, on the downside, should you die early, the residual value of the annuity dies with you, there is usually no return of capital to your estate, unless a capital protection option is chosen.
WHY IT PAYS TO SHOP AROUND – ANNUITY RATES
Seven out of ten people accessing their pension cash since the new pension freedoms came into force, who decided to take an annuity, did so with their existing pension provider.
This statistic reinforces the belief that consumers aren’t sufficiently aware of the options open to them at retirement.
Many pensioners simply opt for the annuity offered to them by their provider, without realising that they are within their rights to shop around and compare deals, enabling them to make an informed choice.
Whilst staying with your existing provider might well represent a reasonable deal for your financial circumstances, taking advice may well reveal alternative options better suited to your needs.
If you’re looking for annuity rates, providers are prepared to offer more income if you have medical conditions including high bold pressure, diabetes raised cholesterol or you are a smoker as this is expected to reduce your life expectancy. Fewer years to pay out an annuity means they can give you more now, often between 20% to 40% extra income.
Enhanced annuities apply to both a pension impaired health annuity and purchased life annuity. In general, individuals who qualify for impaired annuities usually have a significantly reduced life expectancy due to both medical and lifestyle factors.
It could be that a family have an elderly relative in a nursing home with a serious illness and they want to protect the estate from the high costs, in which case an immediate- needs annuity can be considered.
If you’re still wondering why you should pension plan please contact us for pension advice or a chat. Clifford Osborne are Independent Financial Advisors (IFA) based in Eastbourne, East Sussex, offering pension planning advice, mortgage advice, pension scams advice and more. You can read our VoucherFor reviews here. Our clients often come from Uckfield, Lewes, Brighton, Tunbridge Wells, Hastings, Bexhill, Newhaven, Seaford, Crowborough and further afield.