How to shop around for an annuity
When it comes to thinking about retirement, many people don’t realise that there are several options for retirement income. Many people choose to trade in their pension fund for an annuity, which provides them with a guaranteed income in retirement.
Annuities are big business and as such there are a whole host of different companies out there looking to offer the best rates – but working out which one to go for can be a difficult process. For this reason it is often best to arm yourself with the information you need to know about what annuities actually are and how they work before you start shopping around.
Where do I start?
Many people simply do not know where to start when it comes to looking for an annuity, and in many cases this can result in people purchasing the first one that they come across, often offered by their existing pension provider – which may not always be the best for their situation. Before purchasing an annuity it’s important to consider how annuities actually work and how they can benefit you, what affects your annuity income and how you can therefore tailor one to suit your needs, while still receiving an acceptable level of income.
What factors do I need to consider?
When it comes to purchasing an annuity there are a range of factors that you need to consider including whether it will be a single or joint annuity, your current level of health, any additional death benefits you require and how often you want your income to be paid.
Of all of these considerations, your current level of health is perhaps one of the most important and one of the biggest factors in determining your pension income. If you do suffer from medical conditions, or have been a smoker or heavy drinker then you may be eligible for enhanced annuities with higher rates applicable.
How important is it to understand the concept of annuities?
When it comes to purchasing an annuity, having a good understanding of what you are getting within your package is important, as it allows you to make the right decision on an arrangement that will cover you for the rest of your life. As annuities are generally lock-in contracts, it’s important to know that you are purchasing the right one before you sign on the dotted line.