Annuities
for the Self- Employed
Choosing
an annuity
DIY
annuities
Types of annuity
Example
of a comparison table
Getting
a quote via here
The Facts
(Click
on any of the facts below to read more)
An
annuity
is a regular income guaranteed for life (ie the annual income pensioners get
- which most people think of as a pension).
You
"buy" an annuity with your pension fund after retirement. Basically you exchange
the sum you've saved for an annual income.
If
you have an occupational pension your employers will normally arrange your
annuity when you come to retire. You don't have any choice in the matter.
If
you have a personal
pension,
a
s retirement approaches,
your pension
provider will contact you with an offer of an annuity. This initial offer
is highly unlikely to be the best deal you can get so don't accept it automatically.
There's more about this below
You
don't need to get an annuity immediately you retire. You can hold off till
you're 75 - when you have to buy one by law. (This is controversial and seems
to be constantly under review by the government).
There's
an open market in annuities with daily price changes. You can shop around
to make a significant difference to your retirement income, (The tables
below
will give you an idea of the variety in prices - amoung the top).
You
can buy various types of annuity eg an inflation proof annuity or an annuity
that will keep paying your partner after death, and so on. (We'll go into this
further in Types of annuity below).
When
you buy an annuity you lose your pension fund forever by swopping it for the
agreed regular income. There's no going back and your loved ones do not
get whatever's left over when you die. The pension you saved for years is not
yours anymore. You "sold" it to the annuity provider.
This
is why some people opt not to go for an annuity on retirement but go for an alternative.
For example some may opt for an "income draw down", whereby you
can take money directly from your pension
fund and buy an annuity
later on. You'd need to consult an IFA about the alternatives.
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Choosing
an annuity
When
your pension plan "matures", your pension
provider will contact you with an offer of an annuity. What they offer will
depend on the size of your pension
fund however:
Under
no circumstances should you accept the first annuity you're offered.
Most people take their first offer and lose out badly by getting an annuity of
UP TO 30% LESS than if they'd shopped around.
You
can shop around yourself (see DIY below) through we'd suggest
you're probably best off using an IFA
to conduct a search for you.
There are many different types of annuities to suit all needs eg you may
want to provide for your partner if you die first.
For
some examples of different types see 1, 2 and 3 below.
Make sure you buy
the right type. Consider what you need and then find an annuity that matches.
The
following article from The Guardian may be of interest .......
"Pensioners have to buy an annuity, but many are shocked to find
returns are tiny and even if they die early, the insurer pockets the money."
Patrick Collinson reports….. Read more
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DIY
annuities
We would suggest you're really best off talking
to an IFA who specialises in annuities. However here are some of the basics if
you do decide to arrange it yourself.
The
price for annuities changes daily and there is a wide variety of deals
being offered at any one time.
If
you do it yourself, what you're basically looking for is a pension
provider who will give you the best price for the particular annuitiy you
need.
Comparison
tables are published regularly in the national press but for the full spectrum
see Money Management Magazine, and Life & Pensions Moneyfacts.
But
be careful of having your head turned by a false loss leader. Bear in mind
that the rates these tables give are specific to, say, a 65 year old male with
£100,000. Just because company X gives the best deal for that person does
not mean they give the best deal for the 66 year old with a pension
fund of £101,000. In fact company X may well just be creating a loss
leader to attract business so be careful.
The
figures given in the sample tables below usually relate to
how much annual income you can buy for each �10,000 in your pension fund.
You will probably see the tables divided as below.
Types
of annuity
There
are various types of annuity to suit different needs. Here are some of the common
types to give you an idea:
1) Level without
guarantee: This means the income from your
annuity remains the same for the rest of your life ie it will be prone to
inflation.
2)Escalating
5% pa compound without guarantee: The income from your annuity
increases by 5% each year (ie to counter inflation) but stops immediately you
die.
3)
Joint Life last survivor: When the "first life" dies (ie one partner
of a couple getting the annuity pops their clogs) the annuity
passes to the survivor - the second life - and continues until they die.
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Example
of a comparison table
The following is an
example of an annuity
price table taken at random, over a year ago. It serves only to give you an idea
of how they're laid out. The prices will vary from day to day. (We can
show you how to get todays tables)
The
figures in each table show how much annual income you can buy for each �10,000
in your pension fund ie if you have �100,000 in your pension fund multiply the
following by 10.
| Male
age 60 | Level
without guarantee
(See 1)
� pa
(For each �10,000)
| Escalating
5%
(See 2)
� pa
(For each �10,000) |
| Legal
& Gen | 801.24 | 476.28 |
| Standard
Life | 784.8 | 476.4 |
| Friends
Provident | 781.08 | 467.16 |
| Canada
Life | 757.32 | 443.88 |
| Scottish
widows | 757.08 | 446.88 |
| Female
Age 60 | Level
without guarantee
(See 1)
� pa
(For each
�10,000) | Escalating
5%
(See 2)
� pa
(For each �10,000) |
| Canada
Life | 711.00 | 400.92 |
| Norwich
Union | 709.92 | 387.24 |
| Prudential | 708.72 | 393.84 |
| Friends
Provident | 706.2 | 394.8 |
| Legal
& Gen | 705.36 | 390.84 |
Joint
Life
Last survivor
(See 3)
Male 65/ Female 65 | Level
without guarantee
(See 1)
� pa
(For each
�10,000) | Escalating
5%
(See 2)
� pa
(For each �10,000) |
| Norwich
Union | 723.48 | 415.68 |
| Canada
Life | 705.6 | 410.88 |
| GE
Life | 705 | 390 |
| Legal
& Gen | 704.76 | 403.56 |
| Prudential | 702.84 | 406.8 |
Source:
Moneyfacts
If
you want to see this week's annuity rates we can transfer you to Moneyfacts.
They're the market leader in UK best buy personal finance charts. Click
here
(But note our earlier comments about comparison
tables)
Getting
a quote via here
If
you want to get a specific idea of how much you could get with your pension fund
get we can connect you to an IFA who specialises in annuities and will give you
a customised quote by email This is a free service and you're under no obligation
to proceed in any way. Click
here
.
Obviously
this IFA will be interested in arranging your annuity. While
we're sure they'll give you a good service we can't be responsible etc. In any
event, if you do decide to go
with them, please note our firm belief that you should always
get three quotes when buying any financial product.
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