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
News
A poster by Durham Constabulary
news
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine