Annuities: Why shopping around for the best rate is still important


Why shopping around for the best rate is still importantSince the Budget, when it was announced that from April 2015 people will have complete access to their pensions once they hit 55, the press has been awash with stories that Annuities are dead.

Many experts, including here at Investment Sense, disagree and believe that an Annuity is still the right option in many circumstances, more of which later. For those people who still want to buy an Annuity when they retire, new research has shown why it is still vitally important to shop around for the best rate.

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30% difference between the best and worst rate

New research from MGM Advantage, has revealed that the difference between the best Enhanced Annuity rate, available to people with certain medical conditions, and the worst standard Annuity rate, is now a massive 30%.

The research confirms what has long been known, that shopping around for the best Annuity rate is vitally important. Once set up an Annuity can never be changed, which makes careful planning, to make sure the right options, as well as provider, is chosen, crucial.

Experts also point out that tens of thousands of people buy their Annuity from their existing pension provider and therefore never get the chance to find out whether or not they qualify for an Enhanced Annuity, which in many cases could increase the income paid.

Annuity rates drop slightly

The research also revealed:

  • The average Annuity rate has fallen by 0.72% during the second quarter of 2014
  • At the same time Enhanced Annuity rates have fallen by an average of 1.64%
  • Whilst standard Annuity rates have actually risen by 0.42%

Ashton Goodey of MGM Advantage commented: “We are seeing the emergence of two distinct markets for Annuities, with, for the first time, prices going in opposite directions for standard and enhanced rates. This divergence in rate could be down to any number of factors, including the different types of assets providers use to back their books for both standard and enhanced products, as well as tactical pricing decisions.” (Source: MGM Advantage)

Looking to the future, MGM believe Annuity rates will “flat line for a while yet.” Other providers agree, click here to read out recent article: Which way now for Annuity rates, we ask the experts

When is an Annuity still the right option?

Despite the new found flexibility an Annuity will still be the right option for many people looking to turn their pension pot into an income.

So, when is an Annuity still the right option?

  • When you want a guaranteed income
  • If you are in ill-health or have lifestyle factors, such as smoking or high BMI, which means you qualify for an Enhanced Annuity
  • If you want a one-off, simple, solution
  • If you want a better ‘return’ than you can get elsewhere
  • If you want the security of a guaranteed income

You can read more about the times when an Annuity is still the right option by clicking here.

We’re here to help

If you are confused about whether an Annuity is the right option for you or how to get the right Annuity with the best rate, our team of Independent Financial Advisers are here to help you.

You can call one of the team on 0115 933 8433, email or complete our online enquiry form by clicking here.