Annuity Pension - Use it or Loose it!

If you are about to retire and have an Occupational Pension, AVC, Sec 32, Personal Pension Plan, Stakeholder Pension Plan or Retirement Annuity, you will doubt have received an illustration from the pension company setting out your retirement benefits.

This will include the amount of tax free cash you are entitled to and various pension options. You will be faced with making some very important decisions, which could impact on your financial situation for the rest of your life, so it is very important that you choose wisely.

The first thing you should be aware of is that the pension company, that may have looked after the administration and investment of your pension admirably over a long time, may not necessarily be the best provider of your pension  annuity in retirement. In fact, it may be possible to increase your pension by as much as 25% by simply changing pension provider.

 
It is for this reason that you have been provided with an ‘Open Market Option’ which gives you the option of choosing an alternate provider for your pension or annuity, if they can provide a better return.

It is estimated by the Financial Services Authority (FSA) that 6 out of 10 people fail to take up this option and yet failing to do so could be costing them tens of thousands of pounds in lost retirement pension.

Buying an annuity, of whatever type at retirement, is normally a once off decision and once taken, cannot be changed. It is therefore essential that you use your right to obtain comparative annuity illustrations from alternate providers to enable you to maximise your pension in retirement. In other words‘use it o r lose it’.

You will also be faced with a number of different types of annuity choices, and the type of annuity you chose will also have an impact on the retirement pension you receive, so again you need to be sure that you understand what each option means to you, and the impact it may have on your future income.

In my next few posts I will explain in as simple, jargon free terms as I can, the various annuity options available and how they can effect your eventual retirement pension, so if this is of interest please tune in.

I would also like to take this opportunity of stressing that the information provided in this and future posts is generic in nature and should not in any way be considered personal pension advice.

Before making a decision I would always recommend that you seek Independent Financial Advice from a reputable IFA who specialises in pensions. They will be able to help you decide on what course of action is best suited to your personal circumstances.

The author of this post is a retired Independent Financial Advisor who worked in the Financial Services Industry for over 40 years, the last 20 years running his own practice specialising in Pensions and Investment Panning.