Annuities FAQ Continued
Should I switch from my current annuity provider?
It is a popular rumour that by switching your annuity you could be saving yourself a lot of money in the long run. This is sometimes the case, but not always. It is not worthwhile changing your provider unless the saving is significant. It is not advised that you go through the process of switching if the difference is small. Additionally, by switching, it is possible that you could lose the Guaranteed Annuity Rate that may have been offered by your original provider. Penalty charges on benefits taken before you begin retirement may also be a consequence you should bear in mind.
Taking all of that into consideration, it is sometimes a good decision to switch to a new provider. It may be the case that your current pension provider is not offering the best rates on the market, so there certainly isn’t any harm in shopping around. Financial experts would always recommend comparing rates as extensively as possible. One way of doing this is using the Open Market Option, which allows you to find the best possible rates available on the market. You should also consider taking a look at the Customer Financial Education Body comparative tables online. These can predict how much income you may receive depending on different rates offered by different insurance companies.
Whilst doing your own research is an invaluable tool in finding the best annuity rates for you, it is always recommended to consult a financial advisor who can help you to determine whether your current annuity is the best for you. You should also bear in mind that you may not be able to apply for an annuity from any insurance company. Some may require you to have a larger savings fund than you actually can invest.
What factors can influence annuity rates?
There are a number of reasons for annuity rates falling. On a general level, as we are seeing currently, longer life expectancies are causing rates to decrease quite dramatically. Individually, if you retire early, or you set up your pension to be payable to your spouse or partner in the case of death, your annuity rate could fall. A pension increase or having a guarantee period are also two negative factors.
Positively, you could boost your annuity rate by shortening the guarantee period on your pension, or by not paying your pension to your spouse in the case of your death. You could also not have an increase on your pension. Improvement is a possibility if you retire later, but you must check first to make sure that your provider doesn’t issue penalties in this case.
What does it mean to have a guarantee period on an annuity?
Simply put, if you have a guarantee period put onto your annuity and you die within that period, the pension can continue to be paid towards your beneficiaries for the remainder of the guarantee period. Alternatively, the payments will be made as directed by your will.
Does my insurance company take the rest of my pension if I die?
Generally speaking, once you die, your annuity will no longer be paid to you. However, you shouldn’t be concerned that your provider is ‘stealing’ what would have been paid to you otherwise. When you purchase your annuity, you will be given many choices as to how your annuity can be paid to your spouse or dependents upon your death. For example, you can choose to provide a pension to your spouse, or you can take out a guarantee period.
Thinking of Retiring Soon? Have a look at our Annuity Comparison Table