In recent years, low-interest rates coupled with improving life expectancy have forced pension providers to slash annual payouts. These seem to be typically around the 5.5% per year of a total pension fund. If you have a policy issued before 1988, then you may have a Guaranteed Annuity Rate within the policy and these were commonly between 10% and 12% per year. It seems, in my experience, pension providers have been less than forthcoming with this information.
So should you have a pension fund of £100,000, with a guaranteed annuity rate set in the Eighties, this could get an annual income of between £10,000 & £12,000 each year rather than, say £5,500 currently offered (through an annuity purchase).
Private sector pension holders could double their annual payouts through a legal entitlement through some policy’s small print. You should examine the terms of the policy documents before agreeing rates for your annuity.
Buying your income through your pension fund, I expect is the most important pension related decision you will make. If you are purchasing an annuity, remember it’s for life. Once you have bought a pension income through an annuity, the terms can’t be changed. If you fail to spot the set rate and accept a lower offer, you will not be able to change it afterwards.
These policies including Guaranteed Annuity Rates, where pensions providers including Phoenix, Aviva (through Norwich Union, Commercial Union and General Accident), Scottish Widows, Prudential and Scottish Life.
When purchasing an income through your pension fund, take professional advice through a suitably qualified Independent Financial Adviser to make sure you get the best deal.
Any questions contact me – welshmoneywiz@virginmedia.com
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