Policies tailored to fit your needs

Pensions

When you contribute to a personal pension plan, you are building a fund which is used to buy an annuity on retirement; the same is true of many company pension schemes. In simple terms, you invest your capital to provide a lifetime income

As you approach retirement, your pension provider will tell you how much your pension pot is worth and how much income it will buy. The first thing to know is that you do not have to buy the annuity from the company from which you bought your pension plan and it is worth shopping around for the best deal.

Performance varies widely: there can be up to 25 per cent difference between the top and bottom annuity providers.

For the same purchase price, the income from a woman's annuity will be lower than a man's. This is not a case of deliberate sex discrimination, it is simply that women live longer - so the annuity has to stretch further.

Insurance companies that offer good rates for men may not be as competitive for women. So even if you and your partner have the same pension provider, you may do better buying annuities from different sources, says Peter Quinton, managing director of The Annuity Bureau, a specialist firm of independent financial advisers.

He illustrates the point using some major insurers. For a woman aged 60, purchasing an annuity for pounds 100,000, Norwich Union, pays out pounds 9,845 a year, while Commercial Union, pays just pounds 8,782. For a man aged 60, Generali offers pounds 10,686 a year, compared with pounds 9,781 from Commercial Union.

The most common type of pension is a level annuity, which provides a fixed income for life. Should inflation climb, the purchasing power will be eroded, so it may be worth considering one which is linked to the retail price index or which will increase at pre-determined rates.

The downside is that these annuities offer a much-reduced starting income for the same purchase price - typically 25-30 per cent lower for a man of 65. But if you have other savings or one partner is still working, this option may be good for you.

There are a variety of other schemes. Winterthur Life, for example, offers a pension portfolio plan which allows you to defer purchase of your annuity and vary your income from year to year. This means you can avoid being locked into a fixed income when annuity rates are low, and adjust payments to match your needs. For example, if you have a Tessa or other fixed-term investment maturing in one year, you could draw less then and more the following year.

Always do your homework before making decisions and, if in doubt, talk to an independent financial adviser.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
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.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk