Taking Advantage of the Best Annuity Rates

There is a lot to think about when you are planning for retirement, and comparing annuity rates can often end up pretty far down the ‘to do’ list. With most pension providers offering an annuities package as you approach retirement, it can be tempting to bypass the process of comparing different annuity rates from alternative suppliers, and simply take up the first deal that you are offered. 

However, if you take a quick look at the annuity rates on the online, you are likely to notice at least one package that can outperform the first offer made by your pension provider.

Thanks to the internet, the process of comparing different annuity rates is now easier than it was previously. To start with, the aforementioned Legal & General site has a quick and simple to use a calculator that can project a yearly income after the input of just a few details, and this can be useful to get a benchmark figure for comparison. Any of the best personal finance books will explain that searching online is one of the best ways to quickly access financial information. 

The Money Advice Service, which is managed by the Financial Conduct Authority (FCA), was set up by the government to provide free, impartial and independent advice for consumers. Their annuities comparison table, look right across the market and should be a standard port of call for anyone starting to compare annuity rates.

However, there are limitations to these tools. The automated comparison works well if you are fairly sure of the decisions that you want to take, such as the type of annuity you wish to choose, and the level of cover that your spouse might need if you die first. However, if you are unsure of the choice to make with key options, like for example whether you want an escalating annuity – which will counter the effects of inflation – or want a level annuity, which will pay more income initially, you might want to think about taking some professional advice.

Independent Financial Advisers can provide this advice, comparing the whole of the market for you to find the best deal for your circumstances. It is important to establish that it is an IFA you are dealing with, as some Financial Advisors are linked to pension providers, and will therefore only provide information on a limited range of products. 

The term ‘IFA’ is regulated, however, so only independent advisors are legally allowed to describe themselves in this way. While you will need to pay for the advice of an IFA – either through commission or a fee – this expenditure will generally be a fraction of the difference that finding the best annuity rates can mean for your retirement income – it is not uncommon for the difference to be as much as 20% between the best and worst payer on the market.

Getting a medical before arranging the deal can also make a huge difference to the annuity rates that you’ll be offered. Enhanced annuities take into account medical conditions, including things like abnormal blood pressure and high cholesterol, and provide a better income from the outset thanks to the statistical likelihood that the provider will not have to pay out for as long.