The Government may have recently outlined plans to scrap rules that require people to buy an annuity when they reach the age of 75, but for the majority of retirees annuities will still represent the preferred option for securing a retirement income.
Under the Government's proposals, two new types of drawdown will be introduced regardless of age. A capped drawdown, limiting the amount that can be drawn annually from your pension pot will be available to everybody.
Meanwhile, a flexible option with no limit on the income that can be taken, will be offered so long as you can demonstrate that you have already secured a sufficient income to avoid claiming state benefits.
Although the new measures promise greater flexibility for all retirees, some commentators believe that only the top 1% or so of pension savers will truly benefit. It has been suggested that a pension pot of £200,000 or more is likely to be needed to qualify for the flexible drawdown option.
As a result, for many of the estimated 7.8 million people currently in defined contribution schemes shopping around for the most competitive annuity will still be the best option.
This is particularly true for people with certain illnesses such as heart problems, or smokers, who could maximise their retirement income with an enhanced annuity.
Recent research from MGM Advantage found that six in ten people could be eligible for such products, which pay out 24.09% more for men and 22.69% more for women on average.
The importance of searching for the most competitive product was also highlighted by figures that show that over an average retirement, a man with a £50,000 pension pot could be £10,129 worse off if he selects the worst annuity rate rather than the best, whilst a woman could face being up to £11,351 out of pocket.
"Today's retirees are under pressure to make sure every penny counts," said Richard Eagling, Editor of Investment Life & Pensions Moneyfacts. "Unfortunately, many retirees fail to realise that you do not have to take an annuity with your current pension provider. In most cases, a higher annuity will be gained by moving elsewhere."
Figures also showed that annuity rates have fallen by almost 3% over the last 12 months, highlighting the importance of shopping around for the best option in which to invest your pension pot. If you are looking for an annuity to help fund your retirement, a new partnership from Moneyfacts.co.uk and Premier Retirement could help you find the right option.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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