Use Your Pension Plan to Secure the Best Annuity Rates for Your Retirement

Use Your Pension Plan to Secure the Best Annuity Rates for Your Retirement

Getting the best annuity rates can mean the difference between enjoying the fruits of your labour retirement plan and having to count the pennies. If you are nearing the retirement age and don't know how to make your money work for you, speak to a professional for advice about options.

Understanding the pros and cons

Calculating the best annuity rates confuse most non-financial experts so you need clear and simple advice about the pros and cons. That is why consulting with an FSA accredited professional is the best source to trust for the positives and negatives in detail and for the best quotes. So what are the general pros and cons of this type of financial retirement plan? The pros are that once you've reached your target sum and date, you will be paid the equivalent to a monthly salary dependent upon the total amount you invested. This will occur every month until the day you die thereby affording you peace of mind that you have financial security. Moreover, the tax paid on the investment sum is deferred until the plan starts to pay out and then only the gains amount is taxed. These are two pluses. However, on the downside, if you opt for this kind of plan and you happen to pass away before your anticipated life expectancy, the money is lost, unless you have found an option where your spouse still can receive the funds.

Don't commit to your pension provider

Just because your pension comes from one provider source, doesn't mean you are committed to accept their offer for the best annuity rates. It's quite the opposite. In fact, you are well within your rights to have a good look around to see who will give you the best rates. In addition, if you are a smoker, or drink more than the recommended daily intake on a regular basis or have recently been in hospital or take medication or even live in certain areas of a post code, then you may be entitled to more than you currently think. It is another good reason to ensure you have a professional on your side that is unbiased, independent and not linked to any of the major insurance companies. The difference in the rates quoted by each company can vary by 1,000 easily, and that's a lot of money, especially on a restricted budget.

Nothing ventured, nothing gained

In 2007 61% of retirees didn't shop around for the best annuity rates. With the newly established Open Market Option by the FSA your current pension provider is duty bound to inform you of your right to shop around. When your retirement could be as long as twenty years or more, surely it's worth a little of your time to ensure that you are being offered the best annuity rates? And if your life expectancy is shorter because of your lifestyle choices such as you have an above average BMI, then you may be able to receive as much as 27% more with an enhanced annuity scheme.

Insurers basically calculate the monthly sum you're paid over the expected time they will have to pay against the total amount you've invested. So if you have a shorter than average life expectancy, chances are you will be entitled to the best annuity rates.

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