Pension annuity rates can vary a lot across the market. You may find some good rates available only to discover they do not actually apply to you. This is because annuities are a type of insurance product and as such are affected by a number of individual risk factors.
Pension Annuities
Insurance companies selling pension annuity products will assess each applicant individually before providing rate quotes. This is because they will be taking a risk in investing in the product themselves.
For example a customer could invest their pension fund with an escalating annuity rate of 3%.
This would mean the annuity income would increase at 3% every year in line with rising living costs.
However if the policyholder lives for much longer that first anticipated then the insurance company could end up paying out more than they first received for the product.
Therefore insurance companies will be balancing risk when offering pension annuity products to ensure they can make money out of the deal.
Pension Annuity Rates
There are a number of factors that could affect the rates you are offered for pension annuity products. Common factors will include:
Pension Fund – the larger the pension pot you have the more you can invest in annuity products. The more you invest then the more you can expect to receive from your annuity. Bigger investors can often gain access to more competitive rates.
Gender – men can often get much more attractive pension annuity rates than women. This is simply because men are more statistically likely to die younger and so represent less risk to insurance companies.
Smokers – smokers can also get more competitive annuity rates in many cases as they too are statistically expected to die younger.
Age – the younger you are the more likely you are to pay higher pension annuity rates. This is because there is a high chance that you will live longer and so claim more money from your annuity.
Joint Annuities – you can get joint annuities with your partner. This can affect the rates you pay as the annuity will continue to pay out until both named recipients have died. Single-life policies are typically offered at more attractive rates as they represent less potential cost to insurers.
Pension annuity rates can vary depending on a range of factors. It is important to research these factors to understand what rates may be available to you on the marketplace.
