Confused.com has this week launched a service to help thousands of people get higher incomes when they retire.
Our site, Confusedannuities.com, enables those coming up to retirement to shop around and get the best deal possible when they turn their pension savings into a regular income with an annuity.
Increased life expectancy and lower government bond rates mean annuities today pay out much less than in recent years. That’s why it is more important than ever to make sure you maximise your retirement income, which your pension savings generate.
Why comparing annuity deals is vital
If you fail to shop around for the best annuity deal you risk ending up with a substantially lower income for the rest of your life.
Research from the Association of British Insurers suggests that the difference between the lowest and highest paying annuities for the typical individual could be as much as 40 per cent.
But consumers appear reluctant to compare the best deals: well over half of all pension savers fail to shop around when they reach retirement.
Instead, they just accept the annuity rate offered by their pension provider, which is unlikely to be the best available.
Under what’s called the open-market option, your pension provider is obliged to tell you, in the months leading up to retirement, that you are allowed to shop around for an annuity.
But in many cases savers are unwilling to take advantage or do not realise they are allowed to take their pension fund to another annuity provider.
A bigger boost
Another reason for shopping around is to take advantage of the fact that savers get a larger payout if they have certain medical or lifestyle conditions. For example, anyone who has a history of heart trouble, or who is a heavy smoker, could qualify for an enhanced (or impaired) annuity. This will generate higher monthly payments based on the customer’s reduced life expectancy.
By accepting their pension provider’s first annuity offer, savers will potentially miss out on the chance to benefit from an enhanced rate.
Extra protection
When you choose an annuity, there are a number of other points to consider: for example, will your income rise with inflation or not? An index-linked annuity will pay less at the start, but offers protection against soaring prices in future.
And do you want your annuity to cover your spouse after you die? A joint-life annuity offers more peace of mind, but again at a cost.
You can also opt for your annuity to carry on making payments for a minimum period of time – say 5 or 10 years – even if you die before then.
For more information on the options available, check out the Confused.com guide to annuities.
How Confusedannuities.com can help you
The service offered by Confusedannuities.com takes users through every stage of the retirement process. There’s information on finding out how much state pension you’ll receive, plus details of the various financial, practical and emotional changes you’re likely to face when you stop working.
The site will go through the options for turning your pension savings into an income for the rest of your life, and then give you guidance on choosing the right type of annuity for your personal circumstances with the Online Annuity Planner.
Once you’ve made a decision about the most suitable annuity, you can then go ahead and compare the best deals available: you’ll be able to access quotes from well-known firms such as Aviva, Legal & General and Prudential, as well as specialists like LV= and Just Retirement.
Buying an annuity is one of the most important financial decisions you can make, so it’s important to compare all options available to ensure you get it right.
