Annuities and the Postcode Lottery
A recent innovation in annuity pricing, will leave those in affluent
“middle class” postcodes facing even smaller annual annuity
payouts.
One of the UK's biggest insurance group's Legal
& General has decided that people living in
areas with a higher than average household income, are more
likely to live longer and so it will be offering them a
less, by way of annual income, for their pension pot from
now on.
Legal & General has hailed the move as a “natural evolution”
in the annuity market pointing out that postcodes are already
used when pricing peoples' home and motor insurance.
However, the insurer nicely overlooks that the logical
of what it is proposing will see those living in nicer areas
being offered smaller annuities.
How to avoid postcode pricing
Moving to a less desirable neighbourhood just to procure a higher income, may be a step too far for most. For the time being it is just one insurer Legal & General, so it could be worth going to another company to see if they offer a better rate.
Alternatively, delaying when you start your annuity will boost
the annual sum. At present UK law says that anyone with
a private pension (which is not a final salary pension)
has to take out an annuity by the time they turn 75.
Delaying up to that point, however, can seriously up what
you get.
According to recent research delaying taking out an annuity
for 10 years, would add around £2,500 to the annual
payment.
The other alternative is that when it comes to buying
an annuity, it is the one time in your life when it pays
to be in poor health.
It really does pay to declare every little ache
and pain on your application or to your financial
advisor.
Taken in isolation, slightly raised cholesterol, high
blood pressure, or being a smoker might not seem that
big a deal, but the cumulative affect they can have in
raising your annuity offer can be significant. See
impaired annuity section
If you want to get a specific idea of how big
an annuity you could get with your pension fund, we can connect you to an IFA who specialises
in annuities. They will give you a quick customised
quote.
This is a free service and you're under no obligation
to proceed in any way. Click
here. |
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