This does relate to my work so if the mods dissaprove I apologise, but I think that it is of general interest, because it does relate to an individuals health as they come up to retirement.
Most people who have a private pension will buy an annuity when they retire. Most of them will ignore the market and buy it from the company with whom they have been saving. Those are just the statistics. They could almost certainly do better but ????
But if they are ill or merely smoke, they can do much better by seeking advice and going to the specialist market that offers better terms for people with health problems.
A smoker can improve retirement income by 10 - 15 %
High blood pressure ? high cholesterol ? Diabetes ?
or even worse
This year I have have had clients whose incomes have been improved by 90%, 210 % and the most extreme 650 % from the incomes they would have received if they had not sought advice.
If those same people had restricted their research to the ordinary market they would never have seen those improvements. On the ordinary market none of the companies will ask you about your health or lifestyle.
Interesting post, Alrl - I'm interested in knowing how the annuity buying business works. If you have deferred company pensions because of redundancies, do you have to buy separate annuities from each company? In fact, do you have to buy an annuity at all, are there any good alternatives, like investing all your money with, say a Building Society, or would rates be better with the annuity provider.
Thanks.:o
hello Sue
How do annuities work ? and how do you "buy" one ?
The insurance company offering the annuity knows exactly how long you are you are going to live, or in your case how long the average lady of your age in good health (I hope) is going to live. They do their sums, and tell you how much income they will give you (guaranteed) for the rest of your life - they take the risk about how long you will live.
The point I was making is that if you are not in good health you can get a better deal - but only if you seek advice from an advisor who knows that.
How do you buy one - well if you are wise enough to seek advice your adviser will research the market and find the company offering the best deal.
Deferred company pension ? You have two types, final salary and money purchase - jargon strikes and I am not going into detail here (yet).
In a final salary scheme you may be paid a pension directly from the scheme funds and annuities are not used. Smaller schemes may want to get rid of all such liabilities and buy you an annuity. It is open to question as to whether they research the market for each individual case, and certainly open to question as to whether they ask you about your health. But basically you are not in charge of the process. They might offer you choice but ??????
In a money purchase scheme an annuity will be offered but how much research did the scheme trustees do ? Even if they did were they aware of your health.
The solution if you will be better off as a result would be to transfer the deferred pensions into your own personal pension, and then be in charge of making a mess of it yourself or seeking advice. This transfer will not necessarily be the best move.
Once your money is in the pension then NO you cannot take it out and put it in the building society. But there are alternatives to the annuity that are higher risk but might be appropriate.
But I was making the point about getting a better deal if you are ill and that is only available from the annuity (specialist market).
I suspect that you are aware that this is getting more complex. If you want more personalised detail pm or e mail me.
Thanks for the reply Alrl. Fortunately I understand what you saying as I used to work for a Pension Provider! So I know my GMP's from Final Salary!:)
At the time though, I was quite a way off retirement so I didn't really give annuities alot of thought. As time marches on, I am interested in how it all works and what I should expect from my hard earned money and you have explained that very well.
Thanks.
Hi Sue
You were not testing me were you ???
Alastair
LOL, no .... not at all:)
As I said, it's a long time since I worked in the industry and (to give you a clue) it was one of the last mutuals in the UK, it got taken over by the Aussies and then they decided not to stay in the UK market. So.... we were all made redundant by 2000 and that was that!!
Suffice to say, I wasn't employed in the technical area, I was just a PA to the Sales Director but I did learn a lot and actually found the job quite interesting.
Love
You've got me thinking here.
The only thing is, I have a NHS final salary pension and was just going ahead with that and not looking around for any other pension provider.
I am diabetic type 2 but controlled so would I get a better deal than the NHS do you think?
Hi Orange Blossom
Messing around with final salary pensions is highly controversial. It is conceivable if you are ill enough that it might work. I am not medical so I do not know how bad type 2 (controlled) diabetes is.
How close to retirement are you ?
Would the NHS pension trustees even offer a transfer value ?
Are you single or married ?
Apart from that I have pm'd you
Alastair