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3 step guide to buying an annuity?
In order to buy an annuity, simply follow these 3 simple steps:
- Find out how much your pension pot is valued at – if you have more than one pension scheme, make sure that you calculate the total for all of them combined
- Review the quote from your existing pension provider
- Call TheRetirementCentre.com Annuity Service, or simply complete the Quick Annuity Quote form above to see how much more retirement income we can get for you in comparison to the quote offered by your pension provider.
TheRetirementCentre.com Annuity Comparison Service
Freephone 0800 652 7696.
Lines are open
Monday to Friday 9am till 5pm
What is an annuity?
If you’ve been paying into one or more pension schemes during your working life, then you will have saved a pot of money for your retirement, called your pension or ‘pension pot’.
An annuity, or pension annuity, is a product which converts your ‘pension pot’ into a regular retirement income. The amount of income you will receive will depend on a number of circumstances.
To find out how much income you can expect in retirement use our Annuity calculator or annuity quick quote form this will provide you with an accurate indication of the level of income you can expect to be paid by your Retirement Annuity payable for the rest of your life time.
What is an Enhanced Annuity?
The Term Enhanced annuity is used when due to certain medical conditions or activities such as smoking, allows the annuity provider to pay an increased amount to you as your pension income.
This is one of the reasons why it is very important to shop around for an annuity as many pension providers do not offer enhanced annuity rates and will therefore only offer you standard annuity rates meaning that you are potentially reducing your income in retirement by as much as 40%.
Enhanced Annuity rates tend to be offered by specialist annuity providers who only offer enhanced annuities.
Don’t worry by using TheRetirementCentre.com Annuity Comparison Service we compare all Standard Annuity and Enhanced Annuity providers so will ensure that you get the right annuity for your individual requirements, so we can maximise your pension annuity income.
How do I get the best annuity rate?
The most important thing to do to find the best annuity rate is to shop around – you are fully entitled to do this due to the using what is called the Open Market Option or OMO.
This means that you do not have to take your annuity with your existing pension provider, which will ensure that you have access to the best pension annuity rates. By looking at your different options, you could potentially increase your retirement income by 20%.
If you’re looking for the best annuity rate and you’re a smoker or suffer from a medical condition, you can qualify for what is called an Enhanced Annuity. Unlike many other financial products that charge higher rates for medical conditions such as life insurance, by declaring all your medical conditions you may qualify for an enhanced annuity that could increase your retirement income by up to 40%.
Some UK annuity providers offer a special Annuity rate for smokers called a Smokers annuity, this as the name suggests is for individuals who smoke and can often offer enhanced annuity rates.
TheRetirementCentre.com annuity rate comparison service is made up of every annuity provider in the UK, including well known names such as Aviva, Legal and General, Zurich and many more. This gives you the reassurance that you are comparing the best annuity rates from the leading annuity providers in the marketplace.
How much income will I receive?
Annuity Rates are constantly changing and the rate or income level that you can get from an annuity will also depend on your circumstances.
To receive a personalised quote, then get in touch with TheRetirementCentre.com Annuity Comparison Service and we will help you to find the best UK annuity quote from a range of leading annuity providers.
TheRetirementCentre.com Annuity Service
Freephone 0800 652 7696.
Lines are open
Monday to Friday 9am till 5pm
Can you take a tax-free cash sum before you buy an annuity?
Yes you can, and the choice is entirely yours. Most retirees are entitled to take up to 25% of their pension fund (or combined pension funds if you have more than one) as a tax-free lump sum. Whatever you have left after taking this lump sum is then used to buy an annuity. Alternatively, if you wish, you can use your whole pension fund to purchase an annuity.
What do I need to think about before I call?
There are 5 key areas that will have an impact on the retirement income that you will get when you purchase an annuity – think about the following points before you call, so that you can get the most accurate quote possible.
- Who is to receive the income? Is it just for you, or for both you and your partner?
- Do you want the income to rise with inflation or stay at a fixed rate?
- In the unfortunate event that you died, leaving a partner, would you want them to continue to receive an income from the annuity?
- Do you want to guarantee the period of payment for 5 or 10 years?
- Do you want your retirement income to be paid in advance or arrears?
Do I have to stop working before I can buy a pension annuity?
You don’t have to give up work to start receiving your pension income. However, it’s important that you check how this will affect your income tax levels, as if you are working and taking your annuity income, you may be subject to increased tax rates.
Do I have to buy my annuity from my pension provider?
Absolutely not – in fact, for the majority of people it pays to shop around, as in certain circumstances you’ll be able to receive up to 40% more annuity income from an alternative annuity provider than you’d get by buying your annuity from your original pension company.
Your pension provider will have a date stored on their records for when you’re going to retire. This could be a date that you have specified, or more commonly, a date that they’ve assumed – which in most cases will probably be the state pension age.
About 5 months before you reach this pre-defined age, your pension company will send you a ‘wake up’ pack, containing information on the decisions you will need to make when you take retirement along with details of your options. Following this, about 6 weeks before your retirement, they’ll send you an annuity quote.
Pension providers all use different calculations to work out their annuity quotes and will make certain assumptions in order to calculate your annuity – the problem with this is that you could just be receiving a ‘standard’ quote, without consideration for any specific features that you may require or considerations for an Enhanced Annuity.
By using TheRetirementCentre.com Annuity Comparison Service, not only will you be able to get alternative quotes to give you a comparison of what kind of annuity deal you can get, but you can also specify the exact annuity features that you want, to ensure that your annuity quote is tailor-made for your needs allowing you to select from the best annuities UK
I thought my pension scheme automatically provided me with an income?
The majority of people save for their retirement by contributing to a pension, this is often called a money purchase pension or a defined contribution pension. These types of pension schemes don’t automatically provide you with a retirement income – instead you’ll need to purchase an annuity in order to receive an income from your pension fund. An annuity will convert your pension funds into a lifelong retirement income.
If you’ve not been paying into a money purchase or defined contribution scheme, then you may be one of the lucky few who have been contributing into a type of pension called a defined benefit pension.
A defined benefit pension will very likely provide you with a retirement income, without the need to purchase an annuity – check the details in your policy documents, or if you’re unsure and need advice, speak to an independent financial advisor .
How does an annuity work?
How an annuity works is really quite simple; when you reach retirement, you will have amassed a sum of money in your pension fund – you can take a tax free lump sum of up to 25% of this amount. After that, the amount left in your pension fund can be used to purchase an annuity – which provides you with a retirement income that will be payable for the rest of your life.
The amount of income you’ll be offered will depend on a number of different factors, the most common of which are:
- the size of your pension fund
- annuity rates and market conditions when you buy
- your age and gender*
- your postcode
- the annuity options you choose
- the state of your health and certain lifestyle choices
Your annuity income will be subject to income tax and will depend on your individual circumstances.
*Following the European Court of Justice ruling, from December 2012, gender will no longer be a factor that can be used to determine rates.
What are the different types of annuity?
There are two most common types of annuity are; a standard annuity and an enhanced annuity.
A standard annuity or conventional annuity as they are sometimes called, simply means that an insurer believes that your life expectancy is ‘standard’ in other words you do not have any medical conditions, you do not smoke and you are not over weight. On this basis you qualify for a standard annuity. A standard annuity rates in other words the income you receive from it can vary from provider to provider by as much as 20% – so call the Annuity Service today and see how much more income we can get you in Retirement.
Unlike most financial products annuities will pay you a greater income per month if you are not a 100% healthy or have a lifestyle condition such as you smoke or drink more alcohol than the recommended guidelines or are overweight. When you are purchasing an annuity it is really important to inform whoever you are buying your annuity through to tell them as much medical and lifestyle information as possible – not doing this could mean that you miss out on as much as 40% more income for the rest of your life.
There are also other types of annuity available, such as With Profits and Fixed Term Annuities.
If you would like to find out more about with profits or fixed term annuities, please consult an independent financial adviser, to find your local adviser visit unbiased.
Do I have to buy an Annuity before I reach a certain age?
Previously, the law stated that you had to buy an annuity before you reached your 75th birthday. However, the ‘Age 75 Rule’ was lifted by the government in April 2011, so now you can purchase an annuity up to any age that you like.
At what age can I retire and get an income from my pension annuity?
While you can actually retire at any age you choose, the current pension legislation in the UK stipulates that you can’t start taking your pension benefits until you reach 55 years of age.
If you think you’d like to retire at 55, there’s an important factor you will need to bear in mind. The earlier you take your pension, the more years your pension fund will need to cover – so you need to understand that, in most cases, the earlier you retire, the more your annual retirement income will be reduced.
By using this same consideration, you soon see that the later you retire, the fewer years your annuity will have to last for – so in this event, you are likely to enjoy a higher income from your pension fund.