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.

Tip For The Best Balance Transfer Credit Cards

Balance transfer credit cards make an excellent choice for consumers looking to transfer a balance from a higher interest rate credit card to one with a lower interest rate. In this way, the consumer can save money by reducing or even eliminating finance charges. When looking for the best balance transfer credit cards, it is important to look at a variety of factors.

The APR is one of the first factors a consumer should consider when looking for the best balance transfer credit cards. Credit card companies are hoping to steal your business away from other credit card companies. As a result, they often make special introductory offers with lowered interest rates for balance transfers. In many cases, this APR will even be 0.00%. Be sure to find the balance transfer credit card offering the lowest APR, and then only use that card for your balance transfer. Don't use it to make any purchases. This is what the credit card companies are hoping consumers will do so they can assess finance charges on the purchases they make with their card.

The length of the special introductory APR varies from card to card. Sometimes, the length is also dependent upon the applicant's credit history. It is important to be sure how long this period lasts and to set goals to have the balance paid in full once the introductory period is complete. The best balance transfer credit cards will keep the special introductory rate in effect on the card for the life of the loan. In other words, the APR stays the same until it has been paid off entirely. For consumers that will not be able to pay off the balance within the introductory period, this is certainly the best way to go.

Most credit cards assess fees when making balance transfers. These fees are generally determined as a percentage of the total amount of funds transferred. Most commonly, balance transfer fees are 3% of the amount transferred. Many balance transfer credit cards will, however, waive these fees during the introductory period. It is best for consumers to choose these balance transfer credit cards. Otherwise, they may be paying large amounts in fees, negating the savings in finance charges.

Some balance transfer credit cards require initiating balance transfers at the time of application for the card. Yet others allow balance transfers to be completed throughout the duration of the introductory period. The best balance transfer credit cards are the former, simply because they allow for more flexibility. Consumers who are sure they will not need to transfer balances later may, however, be happy with a credit card that only allows transfers to be made at the time of application.

Some balance transfer credit cards place restrictions on the types of balances that can be transferred. For example, some business credit cards only allow business expenses to be eligible for introductory rates. It is important for consumers to be sure to understand what type of balances can be transferred before applying for a card to ensure it meets their needs.

Many balance transfer credit cards also have special rewards programs. Consumers need to compare the programs before deciding on a credit card so they can choose the card with the rewards program best suited to their lifestyle. In addition, some balance transfer credit cards do not count the funds that are transferred toward the points system used in the rewards programs. To get the most of the card, consumers should find balance transfer credit cards that do count the transfers toward their rewards programs.

Credit Check

Credit Check

There are three credit reference agencies in the UK, Callcredit, Equifax and Experian. When you apply for credit potential lenders can conduct a credit search with these companies to determine if you are credit-worthy or not.

These credit reporting companies keep detailed information relating to your credit history which is supplied on a monthly basis by all those you have credit accounts with. For example, what loans and credit accounts you have, whether you have kept up to date with payments or defaulted on accounts and if you have any county court judgments or bankruptcies against you.

They also record your date of birth, name and address, any previous names and addresses and any joint applications for credit that you may have. All the information on your credit file is kept for a period of six years.

When lenders conduct a credit search they will use the information in your credit report to determine whether to accept your application for credit, in other words they will assess how much of a risk you are.

Different lenders have different criteria for offering credit so you could be rejected by one lender but accepted by another. However, don't be tempted to apply to too many lenders in a short space of time as all credit searchers are recorded and too many credit searches will worsen your credit score.

What is a credit score?

A credit score is a mathematical calculation based on the information contained in your credit report and is an indication of how much of a risk you are to potential lenders. Even if your credit score isn't particularly good, a lender may still decide to offer you credit but at a higher interest rate.

How can you improve your credit rating?

If you are not on the electoral roll then it is unlikely you will be able to get any credit at all so make sure that you are and that you complete the forms each and every time they are sent out.

By obtaining a copy of your credit file you will be able to check to make sure it is accurate and if it is not, to have any errors corrected and you will also have a good idea as to what you need to deal with to improve your rating.

At the very least:

- Make sure that all your payments are made on time every time as each time you are late with a payment or miss a payment your credit rating will be affected.

- If you have several credit cards with payments to make at different times of the month it might be a good idea to consider setting up a direct debit for the minimum amount each month so that you don't forget and then try to pay more by other means each month.

- If you have savings then consider using your savings to pay off any debts you have, particularly those with high interest rates as the overall amount of debt you have influences your credit rating.

It's important to remember that if you have a substantial amount of debt it is never too late to take steps to sort it out. If you are worried seek advice. No matter how poor your credit rating is, it can always be improved.