There is plenty of negative vibes around pension annuity rates at the moment and rightly so
, they are the lowest they have been for over 15 years. If you are one of the thousands each month that have to purchase an annuity then you probably wish you were 15 years older.
With longevity increasing each year, the income from your pension annuity has to last what could even be 30 years. With a fixed rate pension annuity the buying power of that annuity will drop as each year passes. If take a risk and go for an asset backed pension annuity the underlying asset may not perform as you expect and then you will have to reduce your income to make it last longer. So in reality for today's retirees it is a no win situation.
What can you do about it? Well first and foremost do not buy a pension annuity from the company you saved your pension with until you have obtained quotes from at least one other annuity company. There is quite often a huge differential in the annuity rates of insurance companies, sometimes as wide as 20%.
Use the open market option and better still seek independent financial advice from an annuity specialist. An annuity specialist will search the entire annuity market place to find you the best pension annuity rates. There are many insurance companies that do not sell their products to the general public, instead they only allow independent financial advisers to sell the products, and this means if you are doing your own research you would not be able to obtain an annuity quote from some of these providers.
Surprisingly, some 62% of retirees do not shop around; instead they just accept that the first annuity quote they receive is acceptable. This is very poor management of the hard earned savings they accumulated in their pension fund. Annuity purchase is probably one of the most important financial decisions you will ever make, surely therefore it deserves more attention than most people seem to give it.
Also research the alternatives to pension annuity products; these are pension drawdown which can be a very flexible option to the pension annuity. If you are looking at alternatives to annuities then consider the risk element. One of main reasons pension annuities are so popular is because they are safe and when it comes to retirement income the majority of retirees don't want to take a risk.