How to Get the Best Annuity Rates

Annuities are a suitable financial product for many people approaching pension age. If you’re in a high tax bracket, you can take advantage of the tax-free growth these products provide. An annuity may also be a good idea if you are scared that you are going to live for longer than your money will last you.

If you’ve decided that an annuity is a good way to stay secure through your retirement or twilight years, the next step is choosing an annuity provider that gives you the best possible rates.

What Is an Annuity?

An annuity is effectively an insurance policy that gives you income for the remainder of your life. You buy this with the pension pot you have built up. Regardless of how long you live, you’ll continue to receive money at a predetermined rate.

This income can be taxed. However, if you build up a pension pot gradually, you have the option to take a 25 percent lump-sum tax-free, using the remainder of your income to buy an annuity.

Within many jobs and company pension plans in the UK, it’s likely that you already have some form of annuity plan to form your pension income. This may be defined based on your salary when you retire.

There are three types of annuities:

1. Fixed Annuities: Provide you with a guaranteed rate every year.
2. Variable Annuities: Are tied to investments and may go up or down, altering how much you receive.
3. Fixed-Indexed Annuities: Provide the potential for income to increase if the markets are performing well.

The term of the annuity is important. A lifetime annuity stays the same for as long as you live. The money won’t run out before you die. A fixed-term annuity gives you more flexibility on when you can take the money. However, it does not guarantee you money for as long as you live.

Best Annuity Providers

Finding an annuity provider is all about providing the right information on comparison platforms and shopping around.

Annuity rates are calculated based on your health, age, and the base rate of interest. Deals can vary based on the provider, so it helps to shop around.

The annuity rate is based on a £100,000 investment. However, you can invest more or less if you wish, depending on your pension pot.

The providers listed below are some of the best annuity providers with excellent rates. However, just like insurance, the quote will depend on your specific circumstances, so be sure to get a quote or the help of a financial advisor.

Scottish Widows

Estimated Annuity Rate for a Healthy 65-Year-Old: £4,500 / 4.5 percent

Scottish Widows offers rates for people between 55 and 75, with funds of at least £10,000. Their flexible plans allow you to take a lump sum at the start of retirement. You can take the income annually, quarterly, or monthly.

If you ask Scottish Windows for an annuity quote, they show the best available annuity from all pension providers. This means you can check whether you’re getting the best rate.

Aviva

Estimated Annuity Rate for a Healthy 65-Year-Old: £4,200 / 4.2 percent

Aviva is another flexible provider. They allow you to personalize your annuity plan to suit your own needs regarding length and whether you want to draw 25 percent tax-free. Your quote will consider all the fees, so there aren’t hidden extras.

Aviva policies are eligible to go to a partner or a dependent when you pass away.