The Annuity Purchase Decision

When looking to secure a retirement income via an annuity, many people face the difficult task in deciding when and how to arrange this.  Should it be taken immediately or is waiting a few years hoping for a higher income in the future the right decision?

Swindells Financial Planning, based in Seaford & Uckfield, Sussex, are expert and trusted retirement and pension advisers, helping you to make the decisions that are right for you and showing you the ways to maximise annuity income.

Let us consider an example of a 65 year old male looking to secure a single life annuity with a 5 year guaranteed payment period using his accumulated pension pot of £100,000.

Based on current annuity rates their fund could purchase an annuity of £5,844 gross per annum (figures provided by Money Advice Service). If he delayed purchase of an annuity for two years, then assuming all other matters remain the same, a £100,000 pension pot at age 67 would provide for a gross income of £6,217 per annum.

Therefore delaying an annuity purchase by two years results in lost income of £11,688 (£5,844 for each year delayed) to boost annual income by £373 per annum (the difference between the annuity income at age 65 and age 67).  They will therefore have to survive in excess of 31 years to recoup the lost income they could have been enjoying between 65 and 67. Given that average life expectancy for a 65 year old male is 22 years; there does not seem any sense in delaying securing an annuity income.

However, not all things will remain the same should annuity purchase be delayed.  Annuity rates regularly change, the pension pot could earn (or lose) some value, personal circumstances and health could change and pension and annuity legislation can alter.

It is therefore essential that you seek independent financial advice when considering your retirement.  Swindells Financial Planning can guide you through the myriad of options as well as giving you advice you can trust to ensure that any annuity purchase is the right decision for you.

If you have any questions regarding annuities, or any pension and retirement matters, then please do not hesitate to contact us using the Book a Consultation form below, by emailing or calling 01323 894 202.