Money tip #103 – Shop around when buying an annuity
Make sure you maximise your income when you come to retire.
So you’ve dutifully saved for your retirement and now it’s time to enjoy your twilight years. However, when it comes to converting your pension fund into a regular retirement income around 60% of people simply accept the annuity terms offered by their existing pension fund provider.
But, you are allowed to take your pension fund and purchase an annuity from another provider who will give you more for your money. This is called the Open Market Option (OMO). While your current pension fund provider is obliged to inform you of this option in reality it’s not in their interest to encourage you to take your pension fund elsewhere. Hence most people don’t bother to shop around.
Is it really worth shopping around for the best annuity rate?
Yes, research has shown that pensioners could boost their retirement income by as much as 20% by simply shopping around
So how do I find the best annuity rate?
Fortunately a link to a handy annuity comparison tool, from the Financial Services Authority, is included under the ‘Pensions’ section on the Finance Calculators page. Click here. It will take a few minutes but could make a massive difference to your retirement.
I’ve heard that smokers and people in ill health can get even better annuity rates, is that true?
Yes it is. You are referring to what are known as Impaired Life and Enhanced Annuities. These will be covered in Money tip #104.
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