In this tough economic climate, many of us are forced to seriously consider our finances for when we reach retirement. However, many people are unaware of annuities – what they are, why we need them and the options that are available when it comes to purchasing annuities.
Your annuity will effectively shape your retirement, in terms of the finances that will be available to you, so it’s absolutely imperative that you learn as much as possible about annuities and make sure that you get the best deal for your individual circumstances.
Through talking to people, young and old alike, it’s clear that far too many people simply aren’t educated about annuities, which is why we’ve compiled……
…..5 facts that many people don’t know about annuities:
1 – Purchasing an annuity is compulsory
Many people think that when you reach retirement, your private pension fund will automatically be repaid each month. In fact, when you approach retirement, you must use that fund to purchase the annuity, which will then be used to repay your funds every month. How much money you’ll receive each month depends on the annuity that you purchase, not necessarily how much of your earnings you initially paid into your pension fund.
2 – You don’t have to purchase an annuity from the same company that deals with your pension
It’s a common misconception that you must purchase an annuity from the same company that deals with your pension. When your retirement approaches, it’s highly likely that your pension provider will bombard you with literature about buying your annuity with them. It’s easy to think that you’re obliged to buy it with the same company, when in fact the Open Market Option Exists. This means that you have the right to shop around and purchase your annuity with whichever company you wish.
3 – How much you will receive depends on age, health and lifestyle choices
Gender is a factor that is currently taken into consideration when your annuity provider decides on your annuity rate. However, a recent ruling in the European Court of Justice says that gender will no longer be a legitimate factor in deciding annuity rates. However, health and lifestyle choices will continue to have a heavy bearing on the rate of your annuity.
Factors such as smoking and alcohol consumption will often mean that the person will receive a higher rate on their annuity, because this will often mean that life expectancy is shorter than with someone who does not smoke or drink.
4 – Once you purchase your annuity, you can’t change it later down the line
This is one of the reasons why it is so important that you choose the right annuity. Once you sign on the dotted line, you may not be able to change your mind in the future. It’s absolutely key that you shop around until you find the right provider for you and your individual circumstances.
5 – An annuity that is right for one person, may not be the right choice for you
With many financial products, it really can pay dividends to seek advice from friends and relatives. You might speak to people who have had good experiences with a particular company, or who have found a great deal with a certain provider, but with annuities, finding the best deals depends entirely on your individual circumstances. Seeking professional advice and conducting thorough research are highly advisable.
This article was provided by Tony Galloway from www.annuitysupermarket.com.