Do you know what an “Open Market Option” is?
Essentially, it means you can shop around with your pension fund to make sure you get the best level of income ensuring that your retirement a good one.
If you are nearing retirement and want to minimise the risk to your income, you should look at a guaranteed lifetime annuity. There are many different types, but they fall into 3 main categories:
- Standard The income offered is lower than enhanced or impaired rates and applies where you are in good health with no lifestyle concerns, or where an insurance company only offers you basic underwriting (such as only considering your age, previous occupation, address etc) and does not offer rates that take your detailed health or lifestyle issues into account).
- Enhanced A higher income is often available to people with certain lifestyle or health issues that the insurer considers to be relevant. A lifestyle issue could include the fact that you are a smoker, pursue dangerous sports or have a high BMI (you could get a higher pension income even if you only slightly overweight in medical terms). Also, a specific health condition such as high cholesterol, high blood pressure, diabetes etc, are also likely to get you a higher pension income.
- Impaired The highest level of pension income is available to people with specific illnesses that the insurer considers to significantly reduce your life expectancy. Often the best rates are available from specialist insurers, who we can deal with to help you get the best income.
We can help advise you on whether you qualify for enhanced or impaired, which will offer higher rates of income for life.
If you only qualify for a standard annuity, you still need to assess what features you want to have, such as:
- Spouses benefitIf you want your partner to inherit all, or just part of your annuity, what impact will this have on your starting income?
- Annuity protection / Guaranteed periodIf you have no annuity protection or spouses benefit, if you die all of your pension money will become the property of the insurance company. What will be the cost of adding protection to ensure your spouse/beneficiaries receive something back from your pension pot?
- Indexation (inflation protection)With life expectancy rising and a good chance you will live for 20 to 30 years once retired, it is extremely important to consider protecting your standard of living against rising prices. If you choose a level income, you are likely to struggle with expenses later in life. We can help you explore your options and the cost of different options.
If you are prepared to take a little risk with your income, you may also wish to consider these other options:
- Short term annuity
- Capped Drawdown
- Flexible Drawdown
- Investment linked annuity
- Scheme annuity
Also worth considering: If you are due to receive an occupational pension, would you get a better income or a more flexible solution if you transferred the capital value to a different provider? For pension transfers involving any secured income such as a final salary scheme we act as introducers only.
Call us to discuss how we can help you make the right decision with this very important choice in life.
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