CR+ Blog

In the run-up to retirement, there are a lot of choices to be made; not least, what sort of income do you want?
Of course, the first thing to remember is that you do not have to take your retirement income from the insurance company that built up your fund for you.

This is called the open market option and, for once within insurance, it does exactly what it says on the tin. You can take your pension fund to just about any insurance company to get the best deal when purchasing an income for life.

One choice is annuities.

An annuity is a promise to pay you an income for life (and a spouse or civil partner, if required). In return for your pension fund, you can have a tax free lump sum of up to a quarter of the fund plus an income based on the remaining 75%.

You will have to decide up front whether you want:

- An income for just you;
- An income for you and your spouse/civil partner when you die;
- A level income;
- An income that rises at a fixed rate or in line with the Retail Price Index (RPI);
- A guarantee that the income will be paid for at least five or ten years, even if you die in the meantime;
- An income linked to the performance of the stock market.

Annuity rates have been in decline for some time now and are considerably less than at almost any point in the last two decades. For example, the annuity rate (amount paid each year based on the pension fund value) for a 65-year-old man in April 1991 was more than 14%; now it is less than 8%. During the same time gilt yields, on which annuity rates are heavily dependent, have fallen from just over 10% to about 4%.

The reason for this is that annuity rates also depend on life expectancy – the longer we live, the more payments the insurance company has to make for a given pension fund value at outset.

Capital Reward Plus is preparing a quote service that will be available for your use in the near future however should you require advice you should contact your usual financial adviser or contact us at info@capitalrewardplus.co.uk confirming your name and address, and we will e-mail you with their contact details.

For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning. The value of investments is not guaranteed and may fluctuate; you may get back less than you put in.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.