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Shopping around for an annuity

We’re used to shopping around for things like savings, car insurance and even mortgages.

But there’s one financial product that many of us don’t shop around for – either because we don’t know we can or because we don’t know how important it is to do.

And that’s an annuity, which pays you an income in retirement.

If you’re paying into your own pension pot, you will probably have to buy an annuity when you retire.

It converts the money you’ve saved in your pension into a monthly or yearly retirement income for you to live on.

You don’t have to buy an annuity from the same company you’ve saved up your pension with. You have the right to shop around.

And, just like shopping around for a savings account can give you more interest, so shopping around for an annuity can produce a higher income.

You could get up to 20% more income every year for the rest of your life.

There are lots of different types of annuity to choose from and shopping around means you can find the right one for you.

The first step is to ask yourself some questions about the type of retirement income you’ll need.

Do you want the same amount each year, or for payments to rise in line with the cost of living?

Do you want an income for your spouse or partner after you die or just for you?

Do you want to guarantee that your retirement income will be paid for a fixed period, such as 10 years, even if you die before then?

And, most importantly, if you’re ill or you have a medical condition, such as high blood pressure or if you smoke – which can damage your health

You could get a higher income through what’s called an enhanced annuity. That’s because you may not be expected to live as long as someone who is healthy.

Although many people get more income by shopping around, there is one situation where you should stick with the pension company you’ve saved with.

And that’s if they’ve offered you a ‘guaranteed annuity rate’ it’s likely to be much higher than the rate you’d get today, so make sure you check.

To shop around, check our annuity comparison tables to see what’s on offer and talk to a financial adviser if you need advice about the best options.

Find out more on our website.

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