Retirement

The first and most important point is that your pension provider will write to you and quote you a pension figure – called an annuity. In effect they will cash in your policy and use the proceeds to pay you an income for the rest of your life. DO NOT ACCEPT THIS OFFER is the key rule. Why?

Find the best pension provider for you

There are a number of reasons why you should not do so. Firstly, you have a right to shop around to see if a different provider will give you a higher income and if they will then you can transfer your pension money to them. This is called the open market option. This is particularly important if you smoke or have a medical condition as there are a number of providers who will increase your pension whereas your provider will not be taking these factors into account.

Secondly, remember that you can only do this once and so if you get it wrong you will receive less money every year for the rest of your life.

Thirdly, there are alternatives to buying an annuity although these do carry the risk that your income will not be guaranteed.

Finally, the way the provider has designed the annuity may not meet your needs. You will need to think about what happens when you die – does the pension die with you or would you want to pass or some of it to a surviving spouse or partner? Will you want to start with a lower income but one that increases either by a fixed amount or by a link to RPI? Will you be paid monthly, quarterly, half yearly or annually – the more often you are paid the lower the income.

So what should you do?

The first thing to remember is that there is no right answer – only the one with which you are comfortable. This means that you must take time to research the various options and to understand the pros and cons of each. This means starting to look at this some time before you intend to retire. This is one area where it pays to talk to an independent financial adviser – they will be able to demonstrate their worth by proving that they can get you a higher income – and if they cannot then do not deal with them.

Remember, this is a very specialist area and so find an IFA that specialises in advice at retirement.

Bob Bullivant

More Information
Contact: 0500 50 65 75
www.annuitydirect.co.uk