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With retirement on the horizon, you may have a couple of big decisions to make regarding how you are going to take income when you retire. Should you choose a Pension Annuity, Pension Drawdown or both?

With people living longer, and the pressure on finances growing, it is essential to make sure you are getting the best deal for you.

Retirement Wake-Up
If you have a private pension, your pension provider (i.e. Royal London, Prudential etc.) should send out a Wake-Up Pack around six months before your agreed retirement date. In general, Wake-Up Packs tend to be very long and can be confusing but should tell you key facts about your pension.

  • Income Forecast.
    How much money you are likely to be able to take without running out of money in the future. The income forecast could also include your providers offer if you purchased an annuity with them.
  • When you can afford to retire.
    This is based on the estimated income you will need in retirement, and the years your pension pot will be able to provide those funds.
  • Investment Choices.
    The pack will detail where your money is invested. You will need to consider whether these funds are too risky for your retirement.
  • Provider Charges.
    The current charges your provider is charging you to continue to allow your money to be invested with them. The provider charges will also show the impact on your pension pot. To see a comparison and the effect of the different provider charges rate, please click here to use our pension fee calculator.

If you have numerous pensions, you may receive a pack from each provider. To reduce the amount of paperwork you may receive, consolidating your pensions a couple of years before retirement could be an option.

Best to shop around
To take income in retirement, one option your provider will have offered is to buy a Pension Annuity. An annuity is an insurance product that will provide you with an income during retirement. A Pension Annuity is the only financial product that could give you a guaranteed income for life, structured to your needs. But, before you go and buy a Pension Annuity with your existing provider, it is worth shopping around to check if you are getting the best deal.

People throw away £1 billion in retirement income because they didn’t shop around when buying an annuity

NAPF and Pensions Institute Research, 2012.

How to get the most for your money
There are several ways to get the most for your money when buying an annuity. Here are a couple of annuity tips:

  • Decide what type of Annuity you wish to buy.
    There are several types of Pension Annuity you could buy, from a lifetime annuity to an investment-linked annuity. Annuities can be tailored to your needs, desires and the different types will have an impact on how much money you can receive.
  • Disclose all your medical and lifestyle concerns
    Disclosing your medical history and lifestyle concerns (i.e. heavy smoker) can help you get a better rate when buying an annuity. The insurance provider will assess your life expectancy and offer you more money if they think your retirement will be shorter than average.
  • Shop around.
    Although you could have been with your pension provider for years, they may not offer you the best deal on the market.
    According to research by the Financial Conduct Authority,

8 out of 10 people could have received a higher retirement income by shopping around

Thematic review of annuities, FCA, 2014.

There are seven big annuity providers in the UK, so checking and getting a quote from each could help you to receive more income than you previously thought. Or you could speak with an Independent Pension adviser from Hilltop Finance, who can do all the legwork for you and help with more annuity tips.

  • Talk to an independent professional.
    An independent pension expert like our advisers at Hilltop Finance can help you decide which annuity is right for you and help you to get the most from your retirement pot. They will also help you to future proof your income by putting in measures that will help you to pass on any excess pension funds to your loved ones should the worst happen.

Speak with Hilltop Finance
To get the most out of your retirement pot and ensure you are taking income as tax-efficiently as possible, speak with our pension specialists today. We offer a free, no-obligation consultation and can outline your retirement options and help you work towards a more prosperous future. Our service is telephone-based for your safety and in line with current government guidelines.

Call Hilltop Finance on 0161 413 7051 or click here to request a callback.