Annuity Rates: What is the Forecast for 2010

At annuitysupermarket.com we like to keep you updated on the latest information on annuities and annuity rates. We are firm believers that everyone should shop around on the open market to find the very best annuity rates.

The Retirement Partnership managing director Steve Lewis offers a commentary on the latest annuity rates.

Since our last annuity update, annuity rates have continued their slide downwards. Our benchmark annuity (£100,000 purchase, joint life 2/3rds, man 65, women 60, level payments) was paying £ 6,080 per annum gross at the end of March but this is now down to £ 5,749 per annum a fall of over 5 per cent. During the same period the yield on long dated gilts fell from 4.48 per cent to 3.87 per cent. This is roughly in line with our rule of thumb which says that for every 100 basis points fall in yields, a level annuity will reduce by 10 per cent. Over this period yields have fallen by 60 basis points and the annuity income by 5.4 per cent.

Kevin Stelfox, Sales Director at annuity specialist Retirement Solutions said, “This kind of information is extremely useful, it does bring home the message that it is so important to shop around with your pension fund and not just buy your annuity from the pension provider you saved with. Everyone has the right to the open market option, but shockingly on a third of people use it, which is disappointing.”

Our own research at annuitysupermarket.com is that the difference between the best and worst annuity rates can be quite alarming, an example from today using research from assureweb, a 65 year old male, using a pension fund of £50,000 after taking tax-free cash, with a level annuity with no options and paid in advance would get £3,422 from the best provider Legal & General, but only £2,988 from the worst of eight providers, that amounts to 14% difference in income. This proves how important it is to shop around to find the best annuity rates.

open market option

Enhanced or Impaired annuity what is the difference?

An enhanced, or impaired, annuity will pay a higher income to people with health problems or where their lifestyle is likely to reduce their life expectancy. Here at annuitysupermarket.com we are always striving to get the best annuity rates for our clients. One question we are always being asked is, “What is the difference between an enhanced annuity and impaired annuity?”

Enhanced annuities

Enhanced annuities are available for lifestyle factors such as smoking or being overweight, even your postcode can qualify for an enhanced annuity rate. Taking prescribed medication for miWhat you need to remember is you do not need to be ill to qualify for enahnced annuity rates. Here are a few quick reminders of what might qualify:

  • Smoking – 10 cigarettes a day for the last 10 years (or the equivalent cigars or tobacco)
  • Obesity, high cholesterol, hypertension
  • High blood pressure and diabetes mellitus

Impaired Annuities

Impaired annuities are those that use a medical condition that may significantly reduced life expectancy. A medical report may be required from your doctor. The following medical conditions will be considered:

  • Heart attacks, heart surgery or angina
  • Life threatening cancers
  • Chronic asthma
  • Major organ diseases e.g. liver or kidney
  • Other life threatening illnesses such as Parkinson’s, multiple sclerosis and strokes

Prudential income choice annuity an alternative to guaranteed lifetime annuities

At retirement you will generally be offered one choice, a lifetime annuity by your pension provider. Some providers however, such as Prudential will also give you a choice of an income choice annuity, which is perhaps better known as a with-profits annuity.

Why would you want an income choice annuity?

If you have other income maybe from investments or you have an occupational scheme then instead of purchasing a guaranteed lifetime annuity where the income is fixed you could opt for the Prudential income choice annuity where the income is reviewed annually. The review could increase the income or decrease the income depending on how the underlying assets have performed.

The income choice annuity is backed by the weight of Prudential’s massive and successful with-profits fund, giving it good potential for growth, and it comes at a time when buying a conventional annuity providing only a fixed income from the outset might not be such a good decision, especially allowing for the ongoing effects of inflation.

You need £10,000 or more (after tax-free cash) to be able to buy the Prudential product. From the outset you select a starting income from within a range that Prudential give you. Your income has the opportunity to grow, by being linked to the performance of our With-Profits Fund. They will also guarantee not to pay you less than a certain amount, known as a Secure Level, no matter how their fund performs.

How to avoid Annuity Delays – Helpful Tips

If you are taking your annuity soon we at annuitysupermarket.com can give you some helpful tips to make sure you do not get any delays. One of the benefits of the open market option is you can shop around for a better annuity rate. Of course, if the money is not moved from one provider to another swiftly then the savings will be lost.

Virgin Money says some companies take up to 51 days to transfer funds. On, say, a £100,000 pension pot, offering an income of £6,651 for a 65-year-old man and £6,270 for a woman, a delay of just one week could mean they miss out on £127 and £120 respectively. But a firm taking 51 days equates to a 10-week delay and costs a poor pensioner a hefty £1,270. People affected are those who have saved into private pension schemes.

Here at annuitysupermarket.com our advisers Retirement Solutions say that these delays can be avoided by just taking notice of three simple tips:

1. Act as soon as you get the wake-up pack from your pension provider. This pack will have all the information and paperwork required. It should arrive at least three months before you retire so take some time and read through it carefully.

2. If you are going to take advantage of the open market option then use a specialist annuity desk. A specialist annuity desk will do this sort of transaction everyday and will have contacts with all the providers to ensure that it goes through smoothly and without delay. Normally these advisers will not charge you a fee for the service as they will be paid commission from the provider.

3. Your adviser should keep in contact with you during the process. If they do not then you should keep in contact with them and make sure they are on top of everything.

Kevin Stelfox, Sales Director at independent financial adviser and annuity specialist Retirement Solutions, said, “The open market option was introduced to help people find better annuity rates, delays can cost them dearly. The majority of delays are caused by incorrectly completed paperwork. As specialist annuity desk like ours will hold your hand every step of the way and ensure paperwork is kept to a minimum and checked before going to providers.”

Retirement – Have you got a plan?

AnnuityIts surprising how many people enter retirement without a plan. Would you plan a car journey without a map or indeed these days taking your sat-nav? No! I doubt very much you would, so why do so many retirees drift into retirement without a plan?

At least 6 months before your intended retirement date you need to write yourself a checklist, this article will give you a few pointers to help you plan. We have all heard that well known Cliché “fail to plan, plan to fail” well it is so true.

So lets start with a few things you need to organise:

  • Annuity – Are you aware how much income yours will provide?
  • State Pension – Have you obtained a forecast of your state pension entitlement? You can get a BR19 form or go online at the Direct.gov website
  • Life Insurance – Once you finish work will your family still have the vital protection in the event of your death?
  • Will – Have you made a will?
  • Emergency fund – Do you have an emergency fund set aside for any unforeseen spending requirements?
  • Benefits – Have you investigated what you may be able to claim, e.g. Council tax benefit?

Now that list is just for starters, I am sure you can add a few of your own.

If your pension provider has not contacted you at least 6 months before you retire then you need to call them and get a retirement benefits pack from them. It is so important to get an idea on what income your retirement annuity will provide so you can plan your retirement expenditure.

Enjoy your retirement!!

Best Annuity Rates 2010

If you are looking for the best annuity rates 2010 then you have come to the right place . Here at annuitysupermarket.com we will search the whole annuity market to find you the best annuity rates 2010.

Our expert annuity specialists will also check to see if you qualify for enhanced annuity rates due to lifestyle or health conditions.  Everyone who buys an annuity has the right to the open market option which means you can take your pension pot to another pension provider.

best annuity rates 2010

Best Annuity Rates 2010 with our annuity calculator

We will use an annuity calculator and specialist research tools to find best rates for you. We have access to many annuity providers that do not deal with the general public, they will only deal with intermediaries like annuitysupermarket.com.

What sort of things can qualify for enhanced best annuity rates 2010?

Around two thirds of men and more than half of all women are overweight. NHS, 2007

  • Body mass index (BMI) uses height and weight to estimate whether a person is overweight. It is a commonly used indicator of body fat.
  • You may qualify for extra income if your BMI score is above a certain level. You could also qualify if your BMI score indicates you’re underweight.

Enhanced Annuities

Annuities are a guaranteed income for the rest of your life. When you purchase an annuity you do so normally on the following criteria:

  • Fund size
  • Age
  • Gender
  • Annuity Options purchased

The annuity provider gives you an annuity rate based on their opinion of your life expectancy. So the longer you are expected to live the lesser the rate the provider will give you. On the flip side of course if you have a shorter life expectancy then you will get a better annuity rate.

This is where enhanced annuities come in.

What exactly are enhanced annuities?

An enhanced annuity is one that pays out a higher rate than conventional lifetime annuity based on the fact that your life expectancy is regarded as lower. Enhanced annuity providers base this on things like:

  • Whether your smoke and how many.
  • Whether you take regular medication.
  • The postcode where you live, in some cases.
  • Your height and weight.
  • Whether you’ve ever been hospitalised with a medical condition before.

If you take medication for a heart condition then you may have a lower life expectancy than those who do not. Therefore, annuities providers expect that they’ll be paying out your income over a much shorter period of time and will offer you an Enhanced Rate Annuity.

How Do I know if I qualify for an Enhanced Rate Annuity?

Industry figures suggest as many as 40% of retirees could qualify for an enhanced rate annuity, which could increase income by anything from a few percent to 60% for a serious medical condition.

If you have some of the conditions mention you may qualify. Get a quote for enhanced annuities

Lifetime Annuity

A Lifetime Annuity, once purchased will tie you in to one shape of income for the rest of your life.   Called lifetime annuities because they pay an income for the rest of your life no matter how long you might live.

The advantages of lifetime annuities are obvious, the guaranteed income they offer. The disadvantage is not so obvious, which is the fact that the income shape cannot change if your requirements change. Retirees like the guaranteed income offered by a Lifetime Annuity, but perhaps they would prefer a plan that can be reviewed in the future as they expect their income needs to change.

There are plans that can do this today. As may retirees anticipate inheriting from elderly parents in the next few years and so they may not need quite as much income later on in retirement as they do now.  A plan more flexible than the lifetime annuity may be required, one that could be reviewed say every 3 years.

Who provides lifetime annuities?

Prudential and Aviva are among the largest as well as Legal & General and Aegon.

These plans are available today and to find out more call us or fill in our web form.

UK Annuity – What are the options at retirement?

Finally you think, I have reached retirement, but it is like starting work again for the very first time, you are the novice. First of all you have to fight your way through all the retirement papers you have been sent from your pension provider and what is a UK annuity? Many retirees are confused by the paperwork that arrives through the door from thier pension provider so they just sign the form and send it back.

What are these annuity forms telling you?

The forms that are sent to you set out your statement of benefits, first of all the amount of pension fund you have at the date the statement was produced (this can and does change) and the amount of annuity the provider is prepared to pay for your age and gender.

These benefit statements are prepared with a set criteria of options for the annuity, for example the provider has probably based them on a single life level annuity with no escalation in payment and perhaps a five year guarantee. Now that may suit the provider but does it suit you?

What annuity alternatives do I have?

First and foremost you do not have to buy your UK annuity from the pension provider. You have the right to shop around on the open market. Secondly you can buy the annuity shape that suits your requirements. There will be an additional form in your retirement pack for you to get an alternative annuity quote from your pension provider on the terms you require.

Visit our website for details of the options that you can choose from.

Annuity Rates – Should you delay annuity purchase?

There are many stories in the tabloids at the moment regarding delay of annuity purchase to get higher annuity rates if interest rates go up. The million dollar question is will annuity rates go up even if interest rates do rise?

As annuity rates have been falling recently and are probably the lowest they have been for decades. Do you understand what the cost of delay could be if you do not purchase an annuity immediately?

An example purely fictional for illustrative purposes:

Mr J a 65-year-old retiree, with a fund of £100,000, who deferred buying an annuity by one year, could have to wait 13 years to recoup the lost income. Even worse, if interest rates fall by 1% over the period, the income from the annuity purchased after deferment of one year could fall to £7,406, meaning it would take 184 years for the client to get their money back.

If you delay by one year, though you receive a bigger annual income you will still be £1400 out of pocket after 10 years. However, after 13 years you will start making money, and after 15 years your total income will be £1586 ahead.

No one can forecast what might happen to interest rates and as always if you can afford to wait in the hope that annuity rates increase then that would be a decision you would have to make.

We recommend you seek independent financial advice if you are unsure and an adviser can talk you through the options.