Retirement Annuity Rates

If you are over 40 then there is a very high probability that you already are thinking about your retirement and how you'll cope financially. As part of that process you may already have wondered about annuities and retirement annuity rates. A retirement annuity is often a fairly simple financial instrument. In principle you purchase an annuity with the lump sum from your pension fund that has accrued to the point you retire. The annuity will then commence paying you a guaranteed monthly amount from then until your death. The provider typically will have utilised your lump sum to invest in fixed-rate return investments such as GILTS and therefore knows that over time their return will be 'x' and they can as a result afford to pay you 'y'.

The annuity therefore provides you with your monthly income to allow you to maintain your lifestyle - this is often known as your pension. If you have an occupational pension you may have no choice in the annuity that it purchases at retirement but if you have a personal pension plan you can use it to purchase an annuity of your choice and one that meets your own individual requirements. The above is, of course, an overly simplified description, as most annuities will also come with multiple options and choices such as the possibility of transferring the annuity to the surviving partner after death etc. Getting the right annuity and best retirement annuity rates could make your retirement just that bit more comfortable. It’s worth taking the time to make the best decision possible. As these are complicated financial products, and your future financial security is dependent on making the right decision, we would highly recommend that you speak to a pensions adviser before proceeding.

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Retirement Annuity Rates: Points to Consider

• Unfortunately any 'unused' amounts of pension contributions you have made over the years that are not subsequently received back in annuity payments are not refunded to your spouse or family at your death. The pension fund once used to purchase the annuity is 'spent' and no longer available to you so selecting the right annuity is critically important;
• Apart from a few exceptional circumstances, once you have purchased your annuity then that's it - you've made the decision and you must live with its consequences. You can't swap it a year or two later for one that looks to offer a better return;
• Given the complexities of the subject and its importance to your future financial wellbeing, getting expert financial advice before you decide may be a very good idea:
• Retirement annuity rates vary over time and by provider. Shopping around is typically a good idea and it can make a substantial difference to your eventual monthly income levels; 
• Over time your monthly income from the annuity will reduce in value as inflation increases prices around you. It may be prudent to think about purchasing one that offers guaranteed annual growth of a specified percentage;
• Once your private pension fund matures and is accessible you will probably find that the fund managers will offer you an annuity immediately. It may be highly advisable to delay accepting this until such time as you have received expert advice and shopped around for the best possible retirement annuity rates. Their offer may be one of the best around but it may not be and you won't know until you've checked.