Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
'How do I find the best annuity rate?'
‘There are numerous publications and websites to compare platforms but how can a private investor find the best annuity rate?’
AJ Bell Senior Analyst says:
Can I start by commending you for looking to shop around the retirement income market - this is an absolutely essential part of getting the right solution at the best price without overpaying in costs and charges.
It is particularly crucial for anyone buying an annuity as this decision is irreversible. By contrast, savers who enter drawdown have the option of switching providers if they are not happy for any reason.
There are various sources you can use to compare annuity rates but I’d suggest the Money Advice Service (MAS) annuity calculator, which you can access here.
There are a couple of reasons I like this annuity comparison tool.Firstly, MAS is an independent organisation created by the Government, so you can be confident the information presented to you doesn’t have any commercial bias.
Some comparison services work on a ‘pay-to-play’ basis, meaning you are only seeing offers from providers which have agreed to pay a commission to the broker.
The MAS service searches for quotes from the following providers: Aviva, Canada Life, Hodge Lifetime, Just, Legal & General, LV= and Scottish Widows. You can draw comfort from the fact this list dominates the annuity best-buy tables and contains firms offering individually underwritten policies. This means if you have any life limiting factors – for example an illness or you smoke – you could be offered a better rate.
Secondly, this comparison service allows you to input your own personal details to ensure you can access both the right product and the best deal.
This includes questions about your age, inflation protection, guarantee periods, spouse’s benefits, any illnesses and lifestyle choices that could affect your rate one way or another. As a result, the quote that comes out incorporates a degree of individual underwriting.
Once you’ve picked your provider you’ll need to go through their underwriting process (the MAS service doesn’t allow you to transact).
At this point it’s worth double-checking you’re comfortable with your decision to secure all or part of your pot as a guaranteed income for life, as well as ensuring you understand the features of the product you’re buying.
For many securing a portion of their income through an annuity will be a sensible decision but it is also a significant one which demands careful planning.
As always, given the significance of this decision you should consider speaking to a regulated financial adviser to make sure you’ve got all the bases covered.
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Please note, we only provide guidance and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.