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   INFO - Is NOW the right time to be buying an Annuity?


 

 

Should I buy now, or is it better

to wait?

 

Should it be a single or a

joint annuity?

 

       The timing of your purchase could be important

IMPORTANT NOTICE: After the rule changes in the 2014 Budget there are likely to be large changes in the annuities market. We suggest that you contact NFA directly to discuss how this may affect YOU!

 

Call NFA today: 01603 452686

 

 

 

 

 

Topical Issues

 

You may have heard talk about it being a bad time to buy an annuity.

 

There is some truth in this, and it is correct that annuity rates have been falling in the last few years; with the double whammy of us living longer and low yields on Government gilts (which annuity providers use to back their liabilities) being the dominant trend.

 

So, although many people are ready to stop work and enjoy a (hopefully) secure retirement they are concerned about committing themselves at a time with very low annuity rates.

 

This retirement decision is not an easy one. While the thought of many years relaxation ahead is very tempting there is also the nagging fear of not having sufficient income to meet the rising cost of living.

 

Considering the steady fall in annuity rates you may reach the immediate conclusion that you should be purchasing an annuity as soon as possible to save suffering from further falls.

 

For some this may be appropriate but this may not suit all.

 

You need to remember that annuity rates are based on life expectancy. So, in principle, the older you are (i.e. the shorter our life expectancy) at the time of your annuity purchase, the better the rate will be.

 

So, by deferring your annuity purchase for a few years your higher age at the time should secure you a higher annuity rate and the possibility is also that gilt yields may have risen.

 

However, whether these two positive influences on your future annuity rate will be greater than the negative effect of the population’s increased longevity is impossible to predict!

 

It should be  borne in mind that the difference between the best and worst annuities rates at any given time can be significant.

 

So. it is important you shop around and don’t just accept the rates offered by your existing pension provider. Their rates are rarely attractive and it is your legal right to exercise a so-called Open Market Option (OMO) allowing you to purchase an annuity with a different provider to your current pension administrator.

 

If you have health problems or a recognised illness, that may reduce your life expectancy, you may also qualify for an enhanced annuity rate so it is always worth applying if you are in doubt.

 

As pointed out elsewhere on this website, the purchase of an annuity is not your only option at retirement.

 

You can keep some or all of your funds invested and draw an income concurrently but this does bring with it additional risks.

 

Alternatively, you can opt for a variable annuity which provides either guarantees to your capital value or level of income.

 

Variable annuities are an evolving market and are worth considering though the cost of the guarantees can sometimes be prohibitive.

 

Whatever decision you reach there are numerous factors to consider before committing to a contract that will last for the remainder of your life.

 

Some of these are: your age, attitude to risk, other income sources, the value of your liquid assets, your health (health of your spouse or partner), the size of your pension fund and a range of estate planning issues.

 

 

So, please remember that once an annuity has been bought that is it.

 

There is no chance to change your mind or alter the terms. You are stuck with it, for better or for worse, for the rest of your life.

 

 

A final issue that you need to remember is that an annuity (unless otherwise specified) is personal. That means that any income from your annuity will cease the moment you die.

 

If for instance a personal work-related pension is converted into an annuity after the 25% cash-free lump sum has been taken and this is considered a 'pension' and shared by e.g. husband and wife it can come as a very nasty shock when payments suddenly cease upon death of the primary annuitant.

 

It is thus very important if you live with a dependent spouse to ensure that any annuities intended to cover both are written as joint life annuities (i.e. that they will continue to pay out until death of the surviving spouse. 

 

It is strongly recommended that independent professional advise is obtained before committing to a contract that will influence your financial situation for the rest of your life.

 

 

Having the right types of protection in place is essential when the unexpected happens..

   find out more 
 

Should we consider setting up  Personal Pension schemes?

A Stakeholder, a PPP or perhaps a SIPP?

         find out more 

 
retired couple

What is the right way to

arrange my Investments?

How much risk can I

afford to take?

How much income can I get?

        find out more 
   

 

 

LET YOUR MONEY WORK FOR YOU!

 

 

 

 

 

 

 

 

VISIT THE DEDICATED NFA INVESTMENT SITE

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You are always Welcome

to contact NFA for a free discussion

of your Annuity plans

 

Phone: 01603 452686

 

 

e-mail: info@norwichpensions.co.uk

 
     

 

 

 

 

 

Norwich Financial Advice Limited  is authorised and regulated by the Financial Conduct Authority

and is entered on the FCA Register under FCA reference: 706645

Norwich Financial Advice Ltd. is registered in England and Wales; Company No. 8533929.  

Registered office: 74 Muriel Road, Norwich NR2 3NZ, Norfolk, England.

 

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