The income in the retirement market has evolved a great deal.  People approaching retirement now have a number of options available to them when deciding which route to take to create the most appropriate kind of income.

In days gone by, people who were retirement planning had built up pension funds and only had the option of using their pension provider for an annuity, and they got what they were given. Since the introduction of the Open Market Option in 1975 and other developments such as Income Draw-down in 1995, pensioners have begun to have more flexibility.  However, the increased level of options has also increased the requirement to seek advice.

There is no such thing as a straight forward annuities purchasing. When retirees have decided that an annuity is the most appropriate one for them, they then need to decide the benefits that they want attaching to their retirement income.  This is even before they decide whether a conventional annuity or an investment annuity is the way to go.

The options that can be included on a “basic” annuity can include a level or increasing annuity. Before purchasing an annuity you will need to ask yourself a lot of questions.

 If an annually increasing income is required, how much should it increase by? 

Would you want a set annual increase, would you want an increase by the Retail Price Index (RPI) or would you rather it increased by the Consumer Price Index (CPI)?

Would you want your spouse to benefit from the pension if you predecease them?

Would you want them to have the same level of pension, 2/3rds or half of what you were receiving?

Do you want to build in any guarantees of pension payment, so that the pension does not die with you? 

How long would you like the guarantee to last, 5 years, 10 years? 

Would you like you income paying in advance or are you comfortable receiving the income in arrears?

What impact with any of these options, will there be on the amount of income you receive?

If you know the answers to all the above, you can quite easily purchase your annuity, on your own.  Then, out of the 20 or so annuity providers, you’ll need to assess who is currently offering the best annuity rate.

Pension and Annuity Advice is very important, the Pensions market is evolving all the time and you need to make sure it’s up to date and relevant to you. Everyone is different and at The Money Map we strive to help you find the option that works for you.