Posts Tagged ‘personal finance’

How To Prepare For Retirement And Choose A Pension Plan

Thursday, December 19th, 2013

In uncertain times, it’s as important as ever that you get the best pension plan possible. There are so many options available however, and the chance to save – or lose out on – a significant chunk of cash for the years ahead.

That’s why it’s best to shop around, read the small print and be as sure as you can that you are buying in to a plan that’s right for you.

One of the biggest choices you need to make as you prepare for retirement is also the first. You’ll need to pick an annuity provider – basically, an insurance company that will pay you a fixed income for as long as you live. This is in return for the money you’ve already saved in your pension pot.

Like any form of insurance, there’s an element of risk involved for both parties. In essence, you’re more likely to benefit the longer you live after retirement – the providers, on the other hand, will pay out less if you pass away sooner rather than later.

When you do pass, the company keeps whatever money you have already given them – it doesn’t go to your next of kin, the government or anyone else. So the insurance companies refer to your lifestyle and actuarial tables in calculating how much you’re eligible to receive.

Many pensioners simply accept the rate offered by the insurance company they’ve used throughout their life, thinking it may be the best, or close enough to the best, rate they could be offered.

However this is actually a relatively competitive market. You may be able to do a lot better than you realised, so do ask around and see what other providers can offer you.

When you do shop around, be sure to divulge any information that might increase your offer.

For example, if you smoke, are overweight, or have a medical history, you may be quoted a better rate. To be blunt, that’s because the provider in question reckons that indications of illness will result in a shorter lifespan for you and a better deal for them.

It’s estimated that up to 70% of retirees could qualify for an enhanced rate, but only a fraction actually get it.

If you can negotiate a high rate though, you can beat the system by living as long as you can, and receive a guaranteed income for the rest of your life!

We do stress that you take the time to research properly, as it’s so easy to change providers before you start receiving your pension – but you can’t switch afterwards.