New rules will boost your retirement cash

It will soon be easy to work out which annuity to choose, but men close to retirement should take pensions now.

Companies which offer annuities will soon be forced to publish the rates they offer to customers.

The Association of British Insurers (ABI), which has proposed the change, hopes it will help people approaching retirement get the best pension deal.

Annuities are like inverted life-insurance policies which people use to secure a retirement income. But unlike life insurance when you bet with an insurer about your death, with an annuity the bet is about how long you will live.

The sicker you are – or the shorter your life expectancy – the higher income you can get. Also, annuity providers – like life insurers – pay out different rates according to their own underwriting practices. Yet many people simply take the annuity offered by their pension provider, which may not be their best option.

"Buying an annuity is one of the most important financial decisions people make, and shopping around for the right one can make a significant difference to people's retirement income," pointed out Stephen Gay, the ABI's director of life, savings and protection.

The move to publish annuity rates so that people can compare the deals offered by different companies was welcomed by pensions minister Steve Webb. "It is a step in the right direction," he said. "Pensions need to be simple and clear so that people can engage with them."

Joanne Segars, chief executive of The National Association of Pension Funds, also welcomed the news that annuity rates could become more transparent from next March.

"Consumers are currently dealing with an unfair and opaque system, which is preventing too many from securing a good retirement income," she said.

Ros Altmann, director-general of Saga warned that people shouldn't, however, buy annuities just on the rate offered. "It is not just about the rate – it is at least as important that people actually buy the right type of annuity when making this irreversible decision," she said.

For example, smokers or those with medical problems, could get much better rates by buying an impaired annuity, which are not always offered by mainstream providers.

Meanwhile, men approaching retirement have been warned that new gender equality laws being introduced next month could mean rates paid on annuities could fall by up to 4 per cent. As a result, it may pay anyone planning to retire in the next few months to take their pension now, according to annuity specialists Partnership.

Andrew Megson, director of retirement at the firm, said: "The new gender legislation which comes into force on 21 December means that men who are thinking of retiring in 2013 may get a significantly higher pension if they retire now."

How early is it worth taking benefits to buy an annuity before the change? In truth that's hard to work out as it will depend on individual circumstances and unpredictable market and annuity rate movements.

But given that, Partnership number-crunchers say a 4 per cent reduction in annuity rates would need a 17-month delay in purchasing an annuity to make up for the difference in moving onto a gender neutral rate.

"Buying your annuity before 21 December is, therefore, worth considering for men with pension funds coming to maturity in the first half of 2013," said Mr Megson.

Independent Partners: 10 top tips for retirement. Get your free guide here

Suggested Topics
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum