Enhanced annuities sales continue to break records

The sale of enhanced annuities has again increased and now make up a third of all annuities sold. These enhanced annuities are bought by retirees that take the trouble to shop around and use the right to the ‘open market option‘.

According to Towers Watson, consumer interest in taking out enhanced annuities – which provide bigger pensions for those with serious medical conditions or with negative lifestyle factors such as weight, smoking and occupation – is set to continue. Enhanced annuities, also known as impaired life annuities, make up over a third of all annuities sold (by premium volume) in the open market in the UK.

These enhanced annuities can quite often get up to 40% plus for those that do take the time to see an independent financial adviser and complete a medical information questionaire. There is a real apathy overall in the retirement options sector with most retirees just accepting the quote from their pension provider. Industry figures say two thirds do not bother to shop around and are therefore missing out on these enhanced annuity rates.

Adam Benson, Independent Financial Adviser at annuity specialist Retirement Solutions said, “I have seen significant increases to retirement income of the clients that have come to me exercising their open market option, as IFAs we know the right questions to ask and can often get 30 to 40% increases in the rates they were offered by the pension provider they saved with. In my opinion not enough people are using the open market option and are therefore missing out on enhanced annuities.”

Guaranteed Annuity Rates (GAR)

Many pension products, especially some of the older contracts such as section 226 retirement annuity contracts have built in guaranteed annuity rates (GAR). A guaranteed annuity rate, GAR for short, is a fixed annuity rate, written into your pension contract, at which you can convert your pension fund, irrespective of what open market annuity rates are doing at that time.

What are the advantages of guaranteed annuity rates?

The main attraction of the GAR is that when they were calculated and written into pension contracts annuity rates were considerably higher than they are now, and pension companies of course had no idea that annuity rates would tumble as they have. GARs can produce annuity payments for life that are higher than anything you can get on the open market.

What are the disadvantages of guaranteed annuity rates?

Many of the pension contracts that guaranteed annuity rates are written into were designed to vest at age 65 and therefore the GAR does not apply until that age. Another point to watch out for is that they will normally only provide an annuity on your own life (single life option, so no spouse benefits) and often will not provide for post retirement increases, so if you require an annuity that escalates each year to combat inflation, this may not be possible.

A further point and one that has caught many out is the fact that many of these guaranteed annuity rates were only valid until age 75. This means that you would only get the GAR until age 75 after which you would revert back to the insurance company standard rates, these could be considerably less that the GAR rates.

As always here at annuitysupermarket.com we recommend you seek annuity advice from an independent financial adviser.

Annuity Rates 3 Top Tips

To get the best annuity rates and enjoy your retirement years you need to ensure that you shop around at the annuitysupermarket and use your entitlement to the open market option.

To get the best annuity rates follow these top tips:

1. Dont accept the first offer from your pension pot provider

About 6 month before your retirement date you will get a benefits pack (often called a wake up pack), this pack will tell you the current size of your pension fund and the annuity rates your pension provider will pay at retirement. Of course unless you are days away from retiring then this pack is just a guide.

2. Use your right to the ‘Open Market Option’ to find better annuity rates

Everyone has the right to the ‘open market option’ which allows you to take your pension pot from one provider to another to purchase your annuity. It is not complicated to do, yes, there are a few forms to complete but this should not deter you.

Will I get better annuity rates from the open market?

This question in probably 95% of cases is yes and the reason is this. Your existing pension provider will normally only quote you standard annuity rates and hope you accept them because that is how they make their money of course. The open market option allows you to see if another provider will give you more for your personal circumstances. So things like gender, age,  postcode, height and weight, if you smoke and your medical conditions can all help towards getting better annuity rates.

3. Use a specialist annuity adviser

To find the best annuity rates you could phone all the annuity providers yourself and ask them to give you annuity quotes. To save time and effort you doing this just approach a specialist annuity adviser like annuitysupermarket and they will do all the work for you. There are some annuity providers that will only deal with advisers and do not deal direct with consumers so you would never get a quote yourself anyway.

Good luck in your quest for better annuity rates and if you follow these simple tips you should have a better retirement.

Old Ladies Get Less

I was always a tomboy as child – doing what my brothers did and always joining with the neighborhood boys. I always believed I was one of the boys and could do anything they could. Of course, there came the time when I finally learned to appreciate my femininity, but my mindset on being able to do things as well as the males only slightly changed. And I always expected to be given the same chances males are given.

Let me be clear: I am not a feminist, but I have recently been familiarizing myself with the mechanics of looking for the best annuity rates and technicalities of pension annuities, seeing as I’m nearing the big 5-0, and I learned that females get less income than males! However would I get to buy presents for all my grandchildren? And what about the vacation of a lifetime I’ve been planning?

It’s really silly, but I have been grumbling about this until a friend told me males get more because their life expectancy is short and therefore has higher chances of not having to be paid for a long time. But still!

I finally stopped complaining about it altogether when my friend remarked: “Well, look on the bright side. Your car insurance premiums are less compared to males.”

Fair enough.

Annuity Rates

Life expectancy has increased considerably over this century therefore once you reach retirement in is important to get the best annuity rates from your pension pot, this is because the income from your annuity will probably have to last you on average over 10 years.

The majority of annuities in the UK are provided by the big Insurance Companies such as Prudential, Aviva, Standard Life, AXA and Legal and General to name a few. They all have different annuity rates for different ages, sex and postcode. Because of this it is very important to shop around a few months before you retire. There was a recent article that was published in America that stated that the British spend more time on Christmas shopping than they do on shopping for the best annuity rates.

Shopping around for your annuity is not that difficult and generally perhaps the best way is to consult the advice of an indpendent financial adviser, he or she will then research the whole of the market including some of the annuity providers you probably have not heard of. If you can it is perhaps also better to find a firm of  independent financial advisers that specialise in annuities. There are many such firms an just typing “annuity rates” into Google should bring up a reasonable list of specialist firms.

It is also important to ensure that you check to see if you may qualify for enhanced annuities as these can give a significant increase to your annuity income.

Annuity Supermarket recommends a specialist annuity independent adviser Retirement Solutions and you can reach them on 0800 043 6701

A refreshingly new approach to Independent Financial Advice

An Independent Financial Adviser is the only financial adviser who can provide advice that is specific and personal to your circumstances from products and services available from the whole market. An IFA will work for you and not the product provider.

Retirement Solutions is an independent financial adviser that specialises in giving advice in the annuities and equity release market.

Retirement Solutions Limited is a whole of market financial adviser. However, we choose to provide advice only in the areas where we have the necessary experience and expertise; annuities and equity release

If you would like us to arrange for an IFA to contact you then please click the form link below. We will then select the IFA who is best suited to advise you.

http://www.formexperts.com/forms/OI31IWVMTT65

TRIVIALITY- RULES FOR SMALLER PENSIONS

Where an individual is aged over 60 (but less than 75) and their total funds from all pension schemes is less than 1% of the Standard Lifetime allowance (SLA) the entire fund can be taken as a lump sum. For the tax year 2009/10, this will equates to £17,500

For example 2008/9 (SLA £1,650,000) if the fund is £16,500 or below, 25% can be taken as tax free cash (£4125) with the balance taken as cash but taxed as earned income.

Time Limit

If you wish to cash-in more than one pension, assuming you meet the qualifying criteria above, you must do so within 12-months of cashing-in the first one.  You will not be able to cash-in any pensions after that 12-month period has expired.

New Rules From 1 December 2009 (occupational schemes only)

These new rules apply to occupational pension schemes only.  They do not apply to personal pensions, stakeholder pension and SIPPs.

They allow small occupational pensions to be cashed-in under triviality rules even if the main rules above have not been met.

The following are the main qualifying criteria:

* You must be between 60 and 75;
* You must not be a controlling director of the sponsoring employer;
* The payment must not exceed £2,000;
* The payment extinguishes your right to benefits under the scheme; and
* There must not have been a transfer-out of the scheme in the 3 years preceding the date of payment; and
* The first 25% of the payment is tax-free, with the remaining 75% taxable under PAYE.

Are you getting the best annuity rates?

When purchasing an annuity you may be able to get the best annuity rates by considering if you qualify for enhancements.

Lifestyle Annuities

Lifestyle annuities take into account certain behavioral and environmental factors, as well as medical factors to determine if you have a reduced life expectancy. Any factor that may reduce life expectancy may be considered. These include smoking – 10 cigarettes, or the equivalent cigars or tobacco, a day for the last 10 years, obesity, high cholesterol, hypertension, high blood pressure and diabetes.

Enhanced Annuities

Enhanced annuities pay out more than lifestyle but not as much a fully impaired annuity as they are designed for those with a reduced life expectancy but to a lesser degree than a fully impaired annuity.

Impaired Annuities

An impaired life annuity pays an even higher income for those who have significantly lower life expectancy. The insurer will require a medical report from your doctor (no need for you to have a medical examination). Medical conditions such as; heart attacks, heart surgery or angina, life threatening cancers, major organ diseases e.g. liver or kidney and other life threatening illnesses such as Parkinson’s and strokes will be considered.

Get Quotes

To get the best annuity rates visit www.annuitysupermarket.com call 0800 043 0725

What’s a guaranteed pension annuity?

This type of pension annuity not only guarantees to pay you an income for life – it also guarantees how much income you’ll get. So you know exactly where you stand.

This kind of annuity is also known as traditional or conventional annuity.

How much income you will get from an annuity will mainly depend on two things?

1. Current long term interest rates – when you buy your guaranteed pension annuity you’re locked into it, at today’s rates, for the rest of your life.

2. How long you’re expected to live – this depends largely on your age and sex.

An annuity is an income for life, so once you’ve made your choice and everything has been set up, you can’t change your mind.

To get advice on guaranteed annuities call us free on 0800 043 0725

Understanding Annuities

When you can buy an annuity

For most people, a pension annuity will be purchased between the ages 50 and 75. However the minimum retirement age will rise from 50 to 55 in 2010 and a few people in special circumstances may be able to avoid annuity purchase at age 75, but most people will purchase an Annuity aged between 50 and 75.

Age

The amount your pension fund will buy depends on your age, gender and state of health as these three factors affect how long you are expected to live. The older you are when you buy an annuity, the higher the amount you are likely to be quoted because the annuity provider (an insurance company) is unlikely to have to pay you for as many years as someone who starts taking their annuity income at a younger age.

State of health

Similarly, if you are suffering from a medical condition or illness which is likely to reduce your life expectancy, your annuity provider will pay you more because you are likely to survive fewer years than someone in good health of the same age. The same applies if you are a smoker or obese.

Gender

Women tend to live longer than men, so a woman is paid less than a man of the same age and with the same size pension fund.

Spouses’ and partners’ pensions

If you want your spouse or partner to have an income after you die, you will want to buy a ‘joint life’ annuity. This will reduce the amount you receive (compared to if you bought a ‘single life’ annuity), but will guarantee your partner or spouse an income for life after your death. Enter their age in the ‘partner’s age’ box.

You can choose what percentage of your annuity income you want your partner to receive – typically, 100%, 66% or 50%. The higher the amount you choose for your partner, the lower your initial income from the annuity rates will be.