Many people coming into their retirement take no advice regarding the different options that are available when taking the benefits from their pension schemes. It is often the easy option to take the income that is being offered by your ceding provider. You could be missing out on a considerable uplift in your income. By not seeking advice you could be missing out on an income sum 40% higher.
There are a number of specialist companies offering enhanced annuity rates based on your medical history and lifestyle including rates for those who smoke. The return is determined by actuaries assuming that certain medical conditions and lifestyle factors are likely to shorten your life expectations.
Your adviser would normally complete a common quotation form which would be distributed to the providers so that they are assessing you based on the same information. Enhanced rates with some providers are available for relatively minor conditions such as hypertension and high cholesterol so it important to disclose all medications that you may have been prescribed event if you feel that overall you are fairly fit and healthy. The questionnaire will also look at your height and weight to assess you BMI and question your intake of alcohol. You may feel that you are a moderate drinker but have you ever calculated the units you consume each week?
Visit http://www.drinkaware.co.uk/understand-your-drinking/unit-calculator to determine your average weekly total.
Many people when asked if they are in good health would answer yes – however if you drink excessive amounts of alcohol each week, you have a high BMI, or you have smoked ten or more manufactured cigarettes per day for ten years or more this could result in a substantially higher level of annuity income being paid.
It is worth noting however that if your health is extremely poor and life expectancy is low, the purchase of an annuity may not be the best option. If you should die before crystallising your pension benefits then your fund will be payable to your beneficiaries without a tax liability providing death occurs before the age of 75. Where death occurs after the 75th birthday than a tax charge of 55% would be applicable. If you had crystallised your benefits to move into a drawdown arrangement then a 55% tax charge would also apply on death. If you die shortly after taking your benefits as an annuity then the income could die with you unless you have made provision in the form of a guarantee or spouse’s benefit.