Most of us when we come to buy an annuity will be entering a world of the unknown. You are only ever likely to buy an annuity once and more importantly and only likely to start thinking about annuities when you are about to finish your working career. They are not a particularly exciting topic of conversation and can be inherently complex which is why so many of us end up with an annuity offer lower than it should be. The question really is how you as an individual can avoid losing out when it comes to your annuity. Well if you can avoid these three steps then you should be well on your way to getting the highest annuity offer possible.
Not reading your wake up pack
First piece of advice, and it seems rather obvious but you do need to study carefully the pre retirement wake up pack which will be sent to you 6 months or so before your scheduled retirement date. It is amazing how many people do not bother to do this for the reasons outlined above: apathy and a general lack of understanding. You may only come to realise the importance of that document when it is too late and you have already bought a lower paying annuity. The document outlines the offer from your existing pension company. Whatever you do, DON’T shove it down the side of the sofa and forget about it. Also don’t fill in their application form without first seeing what else is available from other annuity companies.
This is the technical term that the industry uses to describe the shopping for an annuity process. Although the industry is well versed in the need to shop around, many who buy annuities are not. In fact, most annuitants don’t bother to shop around properly because they don’t realise they have to this in order to get the maximum amount of income. Providers are obliged to provide information about the Open Market Option but will also happily sell you a lower value annuity if it suits them financially. To avoid this ensure you get specialist help so that you can compare rival providers and find out which company is offering the best rates. This can be done using the FSA MoneyMadeClear website initially which offers some useful information. After that it is best to speak to an annuity broker, try this site http://www.annuitycity.co.uk/best-annuity-rates/ if you need simple and honest information.
Not telling the provider about your health
Health and lifestyle are important when it comes to annuity purchases. The reason for this is that your state of health impacts the rate you will be offered. In short if you are unhealthy and have a lower life expectancy than the UK average then you could qualify for an annuity with enhancements. However this will only happen if you tell your provider or adviser about any health conditions you may have. If they are doing their job properly they will ask you this themselves but not all will do this, principally (in the case of providers anyway) because it means they will make less money. The average jump in income is around a fifth higher compared with standard annuities so it is well worth the extra effort. Also consider that if you have a serious illness or condition then the increase could be up to 50% higher.Annuity