Using 1990s Car Insurance Methods to Maximise Retirement Income

The subject of annuities has hit the headlines this week. Even though it hasn’t been compulsory to purchase an annuity at retirement for some time now, many people will still be faced with this dilemma, especially for smaller pots of pension money.

This issue is how to get the most out of the pot that you have spent your life accumulating – and which needs to last the rest of your life. You could convert that pension pot to an annuity (basically just a promise of income for the rest of your life) with the company you are currently with. Or you could try and get a better rate from another company on the open market.

We recently dealt with a male client in his early 70s. After he had taken his PCLS (or tax-free cash as we used to call it!) he was left with £35,000. His current provider offered an income of £1,859 p.a. (this included a 100% spouses guarantee, income not increasing).

Some open market option research suggests best offer is £2,010. GREAT! Had this been achieved by one of the many direct offer companies, there would have been a 3% commission – in this case £1,050 – paid for this automated no-advice research programme, resulting in an immediate increase of +8.1%.

If the process stops there, the client’s annuity rate may have increased from 5.31% to 5.74% but the fund used to purchase the annuity is now only £33,950. Bearing in mind this was a level annuity, the income level is now £1948.73, therefore an increase of just +4.82%, £89.73 per annum. Pah.

At Ovation we charge time, and it doesn’t take much of said precious stuff to make a couple of calls to the annuity providers to see how much this can be increased by. Remember sorting your car insurance before the internet? Hello, this company said this much, can you beat it? Excellent. Hello, this company says this much, and so on. In this particular case we were able to increase the client income to £2,279.76, net of our £400 fee (£750 less than the internet robot).

The difference to the client? A whopping £420.76 per annum. No JR Hartley’s required.

The conclusion is thus, know your options, use your options, and read the small print. Selecting an annuity is an irreversible process so it’s worth making sure you have the best possible deal.

If in doubt, ask an expert; not an extensive open market option automated no-advice robot.

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PRACTICE MANAGER OVATION: Ovation Finance helps its clients and its employees accumulate life, not just wealth. Our principles are best articulated in the guiding question: “Would you advise your mum to do that?”. Ovation Finance is Employee Owned, with employees benefiting from the Ovation Employee Ownership Trust through a profit-share at the end of each … Continued

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July 16, 2019

Episode 46 – The Sharing Economy with Professor Tim Kasser

Join Chris, David and Producer Tommo for part 2 of our interview with Professor Tim Kasser. This time the focus is on practical ideas for financial wellbeing through consuming less. They also have the added bonus of helping to save the environment! With listeners questions and a serious tip not to be missed in #tightasstommo we have a very interesting episode for you.

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