Comparative Examples of Annuities Payable

As It is unlikely that the provider you hold your pension with will provide the most competitive annuity rate you should be able to exercise an 'open market option' to transfer your fund to the most competitive annuity provider. We illustrate the best and worst annual gross annuity payment in each category below on a £100,000 pension fund for a 65 year old male (spouse 60 yrs) on the 18th July 2003. Source of raw quotations is 'The Exchange'.

Type of annuity	Best	Worst	Difference over 10 years
Level Annuity	£7,240	£6,350	£8,900
Escalating at 3% p/a Annuity	£5,360	£4,530	£8,300
Guaranteed 5 years Annuity	£7,182	£6,320	£8,620
Spouses Annuity @ 50%	£6,302	£5,472	£8,300
Special rates annuity (lifestyle annuity)	£8,930	£7,690	£12,400

As can be seen the difference between the best and worst can be significant - remember, once you have committed to an annuity there is no going back! It is therefore imperative that you get it right first time.

Chart showing escalating versus level annuity yields

	1st year	5th year	10th year	15th year	20th year
Level Annuity - Annual income	£7,240	£7,240	£7,240	£7,240	£7,240
Escalating at 3% p/a Annuity	£5,360	£6,033	£6,994	£8,107	£9,399
level Annuity Cumulative Excess Income	£1,880	£7,743	£10,954	£8,910	£775

Please note that in the above example the best level annuity was providing 35.07% more as a starting yield than the 3% escalating version. This is comparatively good value as the investor would have to live to age 85 to break even on the 3% escalating annuity position as the above chart attests. From the 20th year the escalating pension will race ahead - so if you believe that you will live to 90+ then the escalating pension could be best.

Contact us now for a computerised comparison - this service is provided free of personal charge for pension funds in excess of £50,000 as we will rely on commission to cover our costs

Telephone our annuity quote-line on 0800 731 3080

Draw-down Pensions

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