Annuity – Basics How To Make Sure You Get The Best Annuity Rate

What is an Annuity Rate?

Annuities are financial products which allow a person to exchange a lump sum for an income. In the case of pensions, a person can exchange their pension pot for a retirement income which is payable for the rest of a person’s life.

When you approach retirement the pension pot that you have accumulated throughout your working life may be used to by an annuity. It will provide you with an income during retirement, the annuity you purchase will depend on the size of the initial annuity lump sum with any income received from the annuity being taxable.

What is best for me?

The only way to work out which annuity will suit you would be to go through the following list:

  • What are your income requirements?
  • How is your health?
  • What is your attitude to risk?
  • Do you have any other source of income?
  • Are you interested in spouse or death benefits?

Having answers to these questions will help to narrow down the annuity that is suitable for you from the variety of annuities on offer.

Emphasis is being placed on shopping around because it is highly unlikely the first offer you receive will be the best one for you. The majority of people do not shop around because they do not realise the benefit of doing so.

Remember the option of an Independent Financial Advisor remains especially if you require more information or guidance when making your choice, click here to fill in our annuity enquiry form.

Understanding what is on offer and what you can expect will help you to make a better decision that will have a long-term impact on your life, this is because once an annuity is purchased you are committed to it for the future.

Steps for shopping around

The following steps will help you on your way to finding the best annuity for you and your circumstances.

  • Firstly, never assume the first offer received is automatically the best one. Traditionally this will be from the same company your pension scheme is with, as such explore your options and do not automatically believe their offer is the best rate;
  • It is very important that the right annuity provider is chosen for your personal circumstance, the reason is that once a provider is chosen you will not be able to change your provider. So take the time to carefully consider your choice with thorough research and thought;
  • Remember before you agree to or discount your first offer, check and understand what is offered and how it compares to others you are researching;
  • Check that your provider is offering you a guaranteed annuity rate. In this current climate with annuity rates lower than they have ever been, a guaranteed annuity rate can provide a higher retirement income than what exists on the open market. A guaranteed annuity rate mean a provider has to offer a minimum rate for your pension fund;
  • Check whether your provider will charge for purchasing your annuity from a different company;
  • Annuities can be received in many different forms such as single or joint life, level or escalating, different guarantee payment periods. Therefore it would be wise to find the form of annuity that suits you and your goals;
  • Find out how long a quote offered is valid for, you do not want to miss out on a better deal because the quote expired.
  • Make sure to let the appropriate people  know if you have any medical conditions.
  • Finally, you are definitely going to receive a quote for a type of annuity. Check the details to see whether the quote is for the type of annuity you want, not for one the provider is offering.

Have a look at our annuity comparison table below for more information on rates to suit your needs.

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