MONEY MATTERS: By Scott Woods
The importance of taking advice and shopping around, as pointed out by Pensions Minister Steve Webb MP, became very apparent again this week. A gentlemen looking to retire and take his pension with his existing provider came to us for some advice. In this instance, the company didn’t offer annuities but they did refer clients to a “panel” of reputable annuity providers who could quote and make it easier for the client to see the highest level of income available. Half a dozen companies quoted and the highest provider was just under £1,200 per annum. Two things spring to mind in this case – firstly, the client received no advice about the best way to structure the annuity income. Apart from ensuring that any valuable benefits wouldn’t be lost by going to an external provider, very important options such as indexation, spousal benefits, guarantee periods and tax free cash options were not explained or discussed. Secondly, health considerations were included as the providers on the panel do offer “enhanced” annuities. But when we used our research and market evaluation tools, the same provider offered over £1,400 per annum. The moral of the story is that better rates are often obtained by going through an independent financial advisor and with more options now available, the need for help to make the right choices is of paramount importance. In the case above, the client will be many thousands of pounds better off assuming a normal lifetime and that money is better off in his pocket. Taking pension benefits should be an exciting time as it often coincides with a huge change in people’s lives. Whether it means a full scale complete retirement or perhaps just a reduction in hours, you should still get the best outcome you can from your existing plans.