Buying an annuity remains the chosen method of providing retirement income for thousands of people, so here are four ways to guarantee highest annuity rate
Labour MPs Cite Misselling Risk
From April 2015, some fear that unscrupulous investment sellers will encourage people to encash their pension funds, to put the money into inappropriate investments. Providing the Government delivers on its pledge to provide guidance on people's retirement options, for many, an annuity is likely to remain the best solution.
This article focuses on things you should do to secure the best annuity rate.
Think Like An Actuary To Enhance Your Annuity Rate
Here's the most important question you need to ask yourself:
"What has been or could be detrimental to my health?"
You have one chance to get the highest possible income when you give up your pension fund in exchange for an annuity rate. It’s so important to secure the best annuity rate possible, because the income you receive could be paid out for 20 years or more. Once it’s in payment, it’s normally impossible to change your annuity rate. So it’s worth knowing how your annuity rate will be calculated, for it can steer you towards collecting more money.
When they work out how much to pay you, the clever people sitting in the actuarial departments of the big insurance companies think in reverse to the way they think when they assess you for life assurance. In that situation, they’re looking for the fittest, healthiest people possible, to ensure the risk of them coughing up large sums of cash are kept to an absolute minimum.
The secret to collecting the highest annuity rate is to list everything that makes you a poor risk. To put it plainly, if it looks like you’re going to die early, you’ll receive more money.
It’s Important To List Everything
Obviously, it’s necessary to mention all the accidents, illnesses and diseases that have affected your health throughout your life. But there are four other areas that can also boost your annuity rate. In no particular order, here they are.
It’s not just how much you drink that can boost your annuity rate. The type of alcohol you drink can also give you more. In most cases, beer and spirits will qualify you for more money than wine. In a weird twist of actuarial logic, if you don’t drink at all, you might also obtain a better annuity rate.
It goes without saying that smoking affects your health in many ways. It’s reflected in a higher annuity rate from many providers. But if you’ve given up smoking in the last five years, at least one provider will consider giving you a better annuity rate, possibly because their statistics indicate people who give up smoking fail to keep it up, and become less healthy in the process.
It’s not just vital to list everything medical that’s affected you during your life, even childhood ailments. Your annuity rate can be increased if your parents, grandparents and even siblings have suffered with illnesses and diseases that are known to be hereditary.
Work And Education
Statistically, you’re unlikely to live as long if you’ve spent most of your life doing manual labour, compared to sedentary office-based work. And whilst it sounds ‘politically incorrect’, incredibly, your annuity rate could rise if you have few or no educational qualifications.
Get Annuity Rate Quotes From Every Source You Can Find
It can’t be stressed strongly enough that this one-off decision could cost you thousands of pounds if you don’t get the best annuity rate.
Don’t simply settle for the annuity rate quoted to you by your pension provider. Evidence reveals it’s rarely the highest annuity rate available. Under something called the Open Market Option, you have the right to switch providers and buy your retirement income from the provider paying the highest annuity rate. And that means you should definitely compare quotes from EVERY provider.
Use Google and the financial search engines to find the providers. Then ask them all for an annuity rate quote.
Call all the annuity brokers you can find, for some of the bigger firms may be prepared to give up some of their commission to win your business, earning you a better annuity rate in the process. The same is true for the online annuity comparison services.
Believe it or not, you can haggle. That’s because you’re negotiating with a huge sum of money you’ve built up throughout your working life. Every provider would love to have your money and many will tweak the annuity rate to win your business.
Remember, you only have one opportunity to get the top annuity rate, so do everything possible and leave no stone unturned.
Please Share This
If you’ve found this page of interest, please would you kindly send a link to it to your friends and colleagues using the buttons below. You’ll be helping us out, and they might appreciate it too. Thanks, it's much appreciated.
AJ Bell Is Often The Best Value SIPP For Stockmarket Assets
Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
Get SIPP And SSAS Insights Direct To Your Inbox every Monday (It's FREE!)
As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk. Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.
Please read our full Terms which includes criteria for SIPPclub membership.