Many people are disappointed by the size of their pension when they retire. Here are some great ways to boost your pension income.
Pensions have had a pretty poor press in recent years. Much of it has been deserved. I especially understand many pensioners’ frustration with the size of their annuities or pension incomes.
If you’ve worked hard all your life and built a pension pot worth £100,000, you’re going to be pretty fed up if you find your pension is only going to be worth £5,000 a year when you retire. Even worse, if you die a year after buying your annuity, the annuity provider will usually keep your pension pot and nothing will be passed on to your children.
So in this article, I’m going to look at ways to boost your annuity – by as much as 40%! In other words if you have a £100,000 pension pot, you could end up receiving £7,000 every year until you die instead of £5,000 a year.
Before I go any further, I should say that this article won’t be relevant for everyone. If you’ve retired and already bought your annuity, I’m afraid there’s nothing you can do to change things now. And if you’re a member of a final salary pension scheme, then enjoy your good fortune! You won’t need to buy an annuity.
But if you or your employer are paying money into a pension scheme which will give you a pension pot when you retire – otherwise known as a defined contribution pension scheme – then please read on....
Here are three ways to boost your pension income:
Shop around
When you come to buy your annuity, you must shop around. Too many people just take the annuity that is offered by the pension company they’ve saved with. But other annuity providers might be willing to pay a higher rate. You might gain as much as 20%.
Use our new annuity calculator to the find the biggest annuity you can get. It’s quick and easy, and you could boost your pension by thousands of pounds a year.
Tell the truth about your medical record
If you’re asked to fill in a form about your medical history, I suspect many people would want to play down any medical issues they might have. I think that’s partly due to a traditional British desire not to moan, but also because we know that the more ill we are, the more we’ll have to pay for life insurance.
But the reverse applies when we’re talking about pensions. If your health is poor you’re likely to die sooner rather than later, and as a result an annuity company can pay you a higher annual income.
So if you smoke, say so on the application form. If you’re suffering from a serious illness, tell them. Whatever your medical ailment might be, make sure you mention it on the form. It might make a significant difference to the size of your annuity.
When you use our annuity calculator, you’ll be asked questions about your health. That means we can give you a more accurate estimate of how much money you could get when you buy an annuity.
If you shop around, and your health is poor, you could boost your pension by as much as 40%!
Postcodes
If you live in a posh area and you want to boost your annuity, move to somewhere less posh!
I plugged some numbers into our annuity calculator using two different postcodes. Basically someone living in the Barlanark area of Glasgow can get 4% more than someone living in Beaconsfield, an affluent suburb in Buckinghamshire. Well worth knowing!
Read more in Will your postcode affect your pension?
So that’s the lowdown on three ways you might be able to boost your annuity. Check out our calculator and see how big your boost could be.
This is an updated version of a classic article first published in early 2011.