How to Find the Best Annuity Rates for Your Retirement

What You Need to Know

1. Annuities are generally provided by insurance companies and are designed to supply you with an income after you've retired.
2. There can be huge differences in the level income offered by different annuities.
3. Men traditionally received better rates due to having lower life expectancy, but thanks to new EU legislation this is no longer the case.
4. Your age, health, post code and the value of gilt bonds will all go towards the rate you are offered.
5. The recent climate of economic uncertainty has pushed up the price of gilt bonds and consequently reduced annuity rates.
6. To ensure you’re making adequate provisions for later life it’s best to talk to an independent financial advisor.

There is a substantial difference in the size of income that the best and worst annuity rates pay out. As such, it’s crucially important that you secure the best rate available to you for your pension pot as once you've made your choice you can’t go back on it.

What is a Pension Annuity?

An annuity is a type of financial product that provides you with a regular monthly income in exchange for your pension pot when you retire.

Annuities are typical provided by insurance companies. Some of the leading UK providers include Aviva, AXA, L&G, Scottish Widows, Prudential and Standard Life.

As with any form of insurance product, the provider will make calculations as to how much money they will need to pay out and offer a rate accordingly. One of the biggest factors here is your life expectancy as the longer it is, the more regular payments that the provider must make.

This is the reason that, until very recent EU legislation that ruled annuity rates cannot be gender bias, women generally got lower rates as they typically live longer than men.

Pension annuities used to be compulsory in the UK for all by the age of 75. However, since spring 2011 this deadline has been removed, which allows you to be more flexible and choose when you feel is a good time to buy an annuity. This change also opened up other options such as income drawdown.

What affects the annuity rate I am offered by pension providers?

• Your Age: All other aspects being equal, the older you are the higher the rate you will be offered.
• Your Health: If you have any health conditions, are overweight or are a smoker, you may qualify for an enhanced annuity which will give you a higher monthly income.
• Your Life Expectancy: This is the biggest factor affecting the rate you receive.
• Your Postcode:
Providers are using postcode information as part of their evaluation process to predict life expectancy.
• Government Gilt Returns: These are investments that are held by pension providers and affect the annuity rates they offer. Higher returns generally mean better rates.

Annuity Rates are at Historic Lows

Annuity rates have been declining for two decades because of extending life expectancies. Since 2007’s economic downturn, however, the situation for retirees has been made more bleak.

With the volatility of stock markets in recent years there has been increased demand for government gilt bonds, seen as a safety bet in uncertain conditions. This has meant that gilt prices have risen leading to proportionately smaller returns. This is bad news for retirees and means incomes are lower now than pre-credit crunch.

Retirees have been further hit by the economic uncertainty in the eurozone which has put the squeeze on UK annuity rates.

The Golden Mantra: Shop Around for the Best Annuity Rates

Whilst the annuities market is struggling there is still value to be found for retirees. The key is to speak to an IFA and shop around for the best annuity rates on the open market. Options such as enhanced annuities and drawdown can be very attractive.

Market Unlikely to Change Soon

A key takeaway here is that experts are not predicting any sizeable increases in annuity rates in 2013. As such, taking the approaching of doing nothing in the hope that the market may pick up soon is not advised.

A far wiser solution is to speak to an independent financial advisor.

Importance of Using an IFA

This is critically important. The only way to ensure you get the best options in retirement for your is by speaking to a qualified independent financial advisor (IFA). Emphasis being on independent here, as IFAs are required by law to advise you to the best option for your needs, regardless of commission or provider bias.

It is important to understand that there are never one-size-fits-all best solutions when it comes to retirement planning. Every retiree has a highly individualized set of needs and circumstances that must be fully considered when choosing an annuity.

Remember, once you make your choice here, there is no changing it.

How to make Property Investments Profitable

If you are looking to amplify your savings by way of real estate investment, you be supposed to be aware of making all the accurate decisions so you go higher up in the property ladder. The notion here is that when you make profits from a sale, you should reinvest the gain with the initial cash into one more property which is higher when home warranty comes to value in comparison to the first one. This will let you to make a much higher profit even when the rate of increase is similar. You could transfer on to a property located in a lot more pricey neighborhood. If you would like, you can just purchase one that might be superior in design and higher in quality than the first one. From beginning with small apartments and then moving on to single family properties, you can end up with a lot of properties for your portfolio.

It would seem relatively sensible to expand around all your savings if you have a lot of it – around two properties or more. It ensures a safety net if in case one of the properties ends up being less profitable. You could also invest home warranty in diverse types of properties in various places and also with different intents. You can purchase one for regular income or you could purchase some that are for making faster gains as they are, for example, foreclosed properties.

Continually remember that real estate investment is a process that is considered as long term. Commonly, growth is created at around thirty years. This type of investment also requires close monitoring and working on. If you just buy a house then sell it in thirty years, you are not actually assessing its worth and value and you can wind up making smaller profits. It is at times best to consider consulting with a professional if you think that you possess little knowledge in real estate.

Knowledge is undeniably power when you are talking about real estate portfolio management and in this case expert advice will help greatly. You should keep close watch on market events particularly when you are already in possession of a property and you are interested in buying another one. Constantly be aware of property sorts, places including needs of buyers and renters.

If you are considering buying and selling properties, you need to have more information about it. These consist of knowing if there are renovation you need to do and the estimate of such a cost. You must need to identify where you can get tenants to rent out such a property as well as the price they are likely be able to shell out. Other things include knowing of another property similar to yours and just how much they go for. Be a little conservative when making estimates of properties and evaluating the worth of one, but expand this approximate if repairs or renovations are vital. This is a good trick in making sure you tend not to end up dishing out excessively for new properties

Financial Advice: Risk vs. Reward

When investing your money, it's important to take risk versus reward into account. Like so many other areas of life, the risky path has the most potential for a big payoff, but the safe route is all but guaranteed to earn you at least a little something. Knowing your personal risk tolerance level and using this in conjunction with where you are in meeting your financial goals will help you determine the best way to balance your investments.

Smart Investing Means Knowing Yourself

What is your personal tolerance for risk? Would you rather hope for the big payoff and possibly lose money in the meantime, or would you prefer to invest your money in solid accounts with a small rate of return? While no investments are guaranteed, the small accounts can provide you with a fairly reliable return over time. All the same, riskier investments become significantly less risky, statistically, over years, often leading to great returns. After a year of dwindling accounts, it's hard to be confident that riskier investing can be worth it, but if you have enough time left before retirement, playing risk versus reward may be a great bet.

Smart Investing Means Knowing Your Long-Term Goals

If you are almost ready to retire, it's probably safest to keep most of your wealth in medium- to low-risk investments. While these types of investments don't have the same return potential as high-risk ones, they also aren't likely to leave you with less money than you started with. When you look at it like that, it may sound strange to recommend riskier investing to anyone. How can high-risk investing possibly beat the odds?

Try to think of risk versus reward this way: if you invest in a high-risk fund, the value may go up or down. When it's up, you are making money, which you can put back into the investment or invest elsewhere. When it goes down, you may be losing some money on the fund, but you can buy more shares at a decreased rate at this time, giving you higher earning potential in the future. When examined over the span of many years, the higher risk options often provide a greater rate of return than less risky investments. If you have many years before you retire, this may be a great method to build your wealth.

No matter what your feelings are towards risk vs reward, you should seek the help of a financial advisor. These professionals can help you determine both what your personal feelings are toward risk, as well as how to best meet your financial goals. Investments that may seem too risky on the surface may have better returns over time, and seeking the help of a financial planner is the best way to know what the right choices are for you. Maximizing your wealth with the right mix of risk is critical, and with proper research and guidance, you can make it happen.