Compare Annuity Rates Using The Open Market Option
Annuities are something that you buy when you reach retirement age. When you retire, you use the pension fund you have accumulated over your working life along with any savings you might want to contribute to buy your annuity. The annuity allows you to receive an income for the rest of your life which enables the pensioner to cope financially after they finish working.
An annuity therefore provides a secure method of income and it will continue to pay out for as long as you live. Some will cease to pay out when you die but in some annuities you can stipulate that the money you would have been paid is transferred to your partner. This is known as a joint annuity.
>Compare Annuity Rates Using The Form On The Right Or Call An Adviser On 0800 321 3741<
When you reach retirement age you will need to start searching for the best annuity rates. Your pension provider, the company you have been paying your pension into, will probably be the first to offer you an annuity option. However, you should be careful not to accept the first one you are offered as research has shown that you can receive far better annuity rates by shopping around; this is known as the “Open Market Option”.
The annuity rates you are offered depend upon various different aspects. Firstly, the amount of pension you have accumulated as a lump sum is a key factor. At the age of retirement you are entitled to draw down 25% of this pension as a lump sum tax free cash amount, with the proviso that you are not to invest this into any other pension. If you decide to do this, the remainder of your pension fund will obviously be less which will affect your annuity rates.
Your annuity rates also depend on the age you retire and how long the company expect you to live. For example, if you retire at age 70, the company will calculate that they will need to pay out your income for a lesser number of years than if you retired at 60. This means that they are likely to offer you the highest annuity rates.
Their calculations are of course based on risks and there will be various questions that the company will ask in order to best calculate this. For example, they will also need to know if there have been any issues in your medical history such as cancer or heart problems. Your employment background and location will also have an effect on the annuity rates you are likely to be offered.