Buying a pension annuity is an important one-off decision. It is therefore crucial that people take advantage of extra income if available to them when converting their pension fund savings into an income for life. The only way for annuity purchasers to ensure they are not missing out on extra income is by shopping around to compare annuity rates and income offers.
Over the years, it has been debated that more needs to be done by Market Providers and Financial Advisers to assist people in maximising their annuity income. It is estimated that up to half of those purchasing an annuity could qualify for enhanced annuities. Market statistics, however suggest that around a third of those still buy their annuity from their Pension Provider without even enquiring what is available from Specialist Providers. Specialist Annuity Providers tend to offer the best annuity rates, including enhanced rates and income where certain health risks or medical conditions apply.
Financial advice has been transforming and Advisers have been preparing for regulatory change over the past few years. These changes came into force on 1 January 2013 bringing with them three main benefits.
Firstly, charges have become much clearer with many Financial Advisers already agreeing a charge in advance for advising their clients, keeping this separate from the product’s own charges. The changes mean that every Adviser will have to adhere to this and will additionally need to disclose if their fee is fixed, or alternatively whether this is a percentage of the amount being invested.
Secondly, there is even more transparency. In other words, your Adviser must explain whether their advice is entirely independent by looking across the whole of the market, or restricted, specialising in particular areas, or offering a set range of products.
Thirdly, Financial Advisers are now required to have attained a higher level of qualification and commit to at least 35 hours a year of professional development. They must sign up to a Financial Services Authority (FSA) code of practice and hold a Statement of Professional Standing (SPS) to show that they are meeting industry standards. Fortunately, many Financial Advisers have already invested in higher qualifications and were well prepared in advance of the new Regulations.
The new Regulations have been welcomed by the industry who has embraced the changes saying these will lead to a better understanding of financial advice. This will also enable people to become better informed about what is available to them.
Financial advice can assist people in getting the most out of their pension annuity but for those who do not want advice or perhaps cannot get advice, there are some points worth noting in order to try and achieve a better retirement income.
The suggestion is such that you should consider holding off purchasing an annuity from any Pension Provider without first shopping around to see if there is indeed a ‘better deal’. It is imperative to disclose to Providers details surrounding any health risks and medical conditions, particularly when obtaining annuity illustrations as this could result in them offering more income. If any health issues do exist, it is important to obtain an illustration from at least one Provider that offers enhanced annuity rates.
Pension Providers need to ensure that they give people plenty of information and notice about their retirement income choices. Those purchasing an Annuity at retirement should shop around and by being open about one’s health will assist greatly in securing the best possible annuity income.