10 Nov 2014

Opinion: How long will you live?

Opinion: How long will you live?

More and more people are living longer - to the age of 90 for the average women, and 88 for the average man.

New legislation coming into force in 2015 gives retirees greater freedom and choice as to what they do with their retirement funds. However, along with added flexibility, it also brings with it added confusion. 


Lysanne Dunn, Financial Adviser, comments on new legislation for retirement funds.

More and more people are living longer - to the age of 90 for the average women, and 88 for the average man.

New legislation coming into force in 2015 gives retirees greater freedom and choice as to what they do with their retirement funds. However, along with added flexibility, it also brings with it added confusion. 

With the relaxing of drawdown rules and the ability to now take pension funds as a lump sum, an annuity may appear a less attractive option.  However, for those looking for a secure income guaranteed throughout their lifetime, an annuity may still represent the best option for many.  As such, noted below are some of the common mistakes people make when selecting an annuity.

Not shopping around

To begin, accepting rate from their current provider and not getting quotes from the ‘open market’.  Once an annuity has been purchased, the decision cannot be reversed and it is therefore essential that the correct contract is selected at the outset.

The NAPF (National Association of Pension Funds) pointed out that failure to shop around could reduce annual income by up to a third.

Opting for the ‘best deal’

The best rate will not include additional benefits like spouse’s pension; it won’t build in hedge for income against inflation or include any guaranteed amount payable in the event of early death.

Advice is important at this stage to ensure that any necessary options are factored in and that pensioners understand the cost versus benefit of those available.

It is crucial to explore this in detail at this stage before locking into an annuity rate which is irreversible. 

Using DIY comparison sites

In an era where we buy our groceries, check our bank balances and download books online, it is understandable that our tech savvy pensioners turn to the worldwide web to get quotes from various providers for their retirement income.

The downside to using these is some of these services can charge up to 3.5% with the user only receiving ‘guidance’ as opposed to ‘advice’.

It is therefore definitely worthwhile researching the cost of advice.

Lack of knowledge of enhanced annuities

Enhanced annuities are, in short, higher incomes paid to those with a shorter life expectancy than someone the same age in relatively good health.

It is a common misconception that these are only available to those with debilitating illnesses, when in fact smokers, asthmatics and those deemed overweight can also qualify for uplifted rates (albeit to a lesser extent).

Not getting advice

Buying an annuity is a huge decision and one that will determine the income for an average 25 years (as per statistics above) and it is therefore one that should not be made without getting advice first.

At Aberdein Considine, our many financial advisers will be happy to explain the various options available at retirement; lump sum, drawdown and annuities.  Once it is ascertained which is the best route for an individual, they will research the market and put in place a plan for retirement.

To find out more about our Personal Financial Planning service click here.

Lysanne Dunn, Financial Adviser



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