LONDON, UNITED KINGDOM--(Marketwire - July 3, 2012) - You won't necessarily be offered more when delaying your pension annuity purchase. As life expectancy has continued to rise, pension annuity rates and incomes offered by providers have tended to fall as income is expected to be paid for longer. Someone giving up work today is likely to spend an extra couple of years in retirement than someone who retired at the same age just 10 years ago and this means their pension fund savings will need to stretch further.
But annuity rates aren't only influenced by age and life expectancy. Investment conditions also influence the levels of income providers are willing to offer and these have been poor in recent years. So with lower rates and income currently available, more people are starting to reconsider when to buy their pension annuity.
Some are choosing to phase-in their 'retirement' by continuing to work for longer. Whilst others are being advised to use some of their fund to purchase a fixed term annuity until pension annuity rates improve or they possibly qualify for enhanced rates. But as Tim Gosden, Head of Annuity Product Development at Legal & General warns, there's clearly no guarantee that they'll end up off better by delaying purchasing their pension annuity.
"Over the next few years there will be legislative changes in the UK that are likely to adversely affect annuity rates. In 2012 gender equalisation will force providers to offer men the same annuity rates as women even though men don't typically live as long. And Solvency II legislation in January 2014 will require annuity providers to keep extra money in reserve to cover their pension liabilities, meaning they're likely to invest the funds that back their annuities more cautiously. An awareness of the various factors affecting annuity rates will help people make an informed choice and maximise their income."
Tim added; "There's little doubt that a pension annuity paying an income for life continues to be appropriate for the majority of people looking to take a retirement income. One of the criticisms of traditional annuities is their lack of flexibility because once they are taken out they can't normally be altered. But whilst fixed term annuities answer that criticism, there are significant risks attached to them that consumers need to carefully consider before buying.
For a guaranteed annuity quote or to get an instant decision on extra income based on certain health risks, call Legal & General on 0800 048 2445. We may record and monitor calls.