SEARCH, INDEX, UPDATES, CONTENTS, IDEAS, RETIREMENT
Plan early so that you can enjoy it?
Pension contributions should be part of most peoples retirement planning, but there is a lot more to be considered.
A large proportion of people retiring accept the annuity offered by the insurance company with whom they have been investing. It is always worthwhile to consider the 'open market option' to transfer your fund to another annuity provider who is offering a better annuity rate. This can sometimes result in an increase of up to 30% in pension received. We can introduce you to an IFA who will explain your options.
You should be aware that there are various types of annuities which can be taken from pension funds. The standard annuities pay a fixed rate of income for the remainder of your life. The rates offered on these are at a 30 year low.
One alternative is a with profit annuity, although there is some risk the income will go down, there is also the possibility it will increase. At least one provider will provide temporary annuities until age 85, and annuities can be backed by property instead of traditional gilts.
People in poor health can also obtain a much higher rate of annuity than the standard rate because the annuity is likely to be paid for a shorter period. If you are unfortunate enough to be in this position, do ensure that your pension adviser knows that you are in poor health. Do not be embarrassed, one source estimates that 40% of people could qualify for these so called "impaired life" annuities.
You should not leave it to the last minute before making your retirement decisions. You may want to swap into a less volatile fund in the run up to retirement.
People with larger funds (typically £100,000 or more) should ask about phased retirement and income drawdown as alternatives to an immediate annuity, or consider a Flexible Lifetime Annuity which offers a choice of equity based investment funds and some protection of the original fund.
Without making any recommendation, you should also aware of a new (in 2001) flexible product, the "Open Annuity" from London & Colonial, based in Gibraltar, where the funds can become part of the pensioner's estate, and may be inherited by the family, but which requires a minimum fund of £250,000.
An indication of current standard annuity rates is available at www.annuity-bureau.co.uk or www.betterannuities.com, and impaired life annuities at www.biggerpensions.co.uk, but we strongly recommend that you take personal advice from an Independent Financial Adviser (IFA).
If you need to trace a private pension scheme into which you or your employer contributed, contact the Pension Schemes Registry which is part of Opra.
See also NIC Summary, Pension Contributions, Self Invested Personal Pensions, Stakeholder Pensions, Statutory Money Purchase Illustrations.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 21 January 2004.