Purchasing an annuity is one pathway to securing a consistent and assured income for your retirement, either for a set period or your entire life. It’s essential to remember that once you opt for an annuity, the decision is usually permanent.

Are you aware that by comparing different annuity providers, you might boost your retirement income by up to £15,000?[1] Recent insights highlight the advantages of diligently examining annuity options. It’s vital to understand your choices, pinpoint the right annuity type, and aim to get the most favourable terms.

Essential for Retirement Preparation
Annuities stand out as a prominent instrument for retirement planning, presenting a steady and foreseeable income, a feature not always found in alternative investments. Moreover, some annuities can adjust with inflation, offering resilience during economic fluctuations. Those who emphasise safety in their pension plans will find annuities particularly appealing.

The main distinction between annuities and pension drawdown schemes is that annuities necessitate the full pension pot to acquire an insurance product yielding a set retirement income. On the other hand, pension drawdowns offer adaptable income withdrawals while keeping the residual funds invested.

Combining Assurance with Adaptability
While annuities generally don’t leave funds for heirs post the holder’s demise, one can achieve a mix of assurance and adaptability by pairing annuities with pension drawdown.

Per recent findings, a 66-year-old with a pension pot worth £100,000 can currently acquire an annuity yielding an annual income of £6,790. This is an £842 uptick from the prior year, thanks to heightened interest rates spurring the most significant annuity demand in recent times.

The Value of Market Research
Studies underline the necessity of market research. It’s unveiled that for a 66-year-old possessing a £100,000 pension pot, the disparity between the highest and lowest available annuity rates can be significant, amounting to a potential yearly income gap of £622 or a remarkable £14,928 across an average retirement span.

Increased interest rates are behind the current spotlight on annuities, impacting the income of annuity purchasers. Nonetheless, while favourable rates are beneficial, they must be seen in a wider context.

Reference:
[1] Study by Legal & General Retail as of 30/6/23. Calculations are based on a standard lifetime annuity at a 6.79% rate for a 66-year-old individual with a £100k premium, a 5-year guarantee, and a monthly level benefit in advance. Legal & General Retail estimates that a typical 66-year-old with standard health expects to live up to 90 years.

A PENSION IS A LONG-TERM COMMITMENT, GENERALLY NOT ACCESSIBLE UNTIL 55 YEARS OF AGE (57 STARTING APRIL 2028, UNLESS PROTECTED PENSION AGE IS APPLICABLE).

INVESTMENT VALUES CAN FLUCTUATE, IMPACTING PENSION BENEFITS.

INTEREST RATES AT BENEFIT REDEMPTION CAN ALSO INFLUENCE YOUR PENSION INCOME.