If you have any questions regarding annuities, or want to get some advice, we have the answer
Getting advice
Getting advice on your pension could see you significantly better off. By taking advice on your pension, you will be able to:
- Get the best option or combination of options for your needs. Since the pension reforms, you now have more options than ever before on how to use your pension savings in retirement. Speaking to an adviser will help you understand the choices available and find the right one for you.
- Maximise your pension savings. If some of your pension savings remain invested, a pension specialist will be able to manage the investment to maximise its growth at a risk level you are comfortable with.
- Regularly review your retirement to keep you on track. Annual reviews will help you track investment performance and make changes to risk levels, allowing your funds the opportunity to grow.
On top of all this, one of our friendly advisers will get to know you and find out what you want your retirement to look like, and shape your options to help you meet your goals and enjoy a safe, secure retirement.
Advice is given by a professional adviser such as IFAs, financial planners, wealth managers and pension specialists. Advice is regulated by the FCA, protecting you from negligent advice and will give you tailored recommendations for your individual circumstances and ensure that the best option or combination of options for your circumstances is found, even if this goes against what you originally thought to be the best decision for you. Taking advice usually costs money.
Guidance gives a general overview of the options available on the market by highly trained specialists. Guidance services won't tell you what to do with your money however, we can help you research the market to find the right products and providers to suit your needs and preferences. You will be responsible for ensuring that the product you buy is the right choice for you, but taking guidance is a good place to start to help you understand the various choices available.
The cost of getting advice will depend on a number of factors, including the type of advice you choose and how complex your requirements are. However, advice with LV= starts from as little as £995 and we strongly believe that our members get the best outcome having spoken to one of our friendly advisers.
LV= can offer you a commitment-free chat with one of our retirement advisers. We’ll discuss the most suitable advice options for you and confirm any costs before work commences (this usually takes about an hour of your time). You will only ever commit to paying fees if you agree to one of the advice services offered, and your LV= adviser will provide you with details on when and how the fee will be charged, making sure they’re clear and that you understand them.
Retirement advice costs
For full financial advice, our usual costs are shown below. If you choose to proceed with our recommendation, then we will charge a fee and there are a number of ways in which you can pay for the advice including:
- deducting fees from your pension savings when you proceed with the advice (this is called a facilitated adviser charge and you must have enough money in your pension pot to pay for this) or;
- by a single payment.
| Service | Our charges | |
|---|---|---|
| Initial consultation | No charge | |
| Advice report and explanation | No charge | |
| To proceed with our recommendation | Known as our initial advice fee and typically 3% of your pension fund excluding the value of your tax-free lump sum. There’s a minimum adviser fee of £995 and a maximum fee of £10,000. |
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| Ongoing annual review service | For a £40,000-£64,999 pension pot |
£400 per year |
| For a £65,000 pension pot and above |
0.5% per year of the fund value, subject to a minimum fee of £650 per year and a maximum fee of £5,000 per year |
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These fees are not applicable to defined benefit pension transfer advice.
The cost will include a thorough assessment of your personal circumstances, goals and preferences, followed by a comprehensive discussion and report. Your LV= adviser will confirm their recommendations on what actions to take and why, that are personally tailored to meet your needs. Where appropriate, this will include selecting specific products and investment solutions for you from providers across the market and making the arrangements to set these up for you.
So you can continue to get the most from your hard earned savings, LV= can also provide an optional ongoing advice service (for a low annual fee) to make sure your products and investments are performing well for you and remain appropriate to any changes to your personal circumstances and needs.
We offer pension, annuity and investment products from the whole of the market.
By taking pension and retirement advice, the full picture of your pensions and any special inclusions which enhance your retirement can remain protected. For example ‘safeguarded benefits’ like higher income for the rest of your life or a higher amount of tax-free cash may have an effect on the options available to you. A pension specialist is well placed to highlight these benefits to you in a clear and concise way.
In addition, by taking advice you are protected as a ‘retail client’. Retail clients are considered as the most vulnerable, so having financial advice means that you are protected by the FCA from receiving bad advice which may harm your finances. Find out more about how the FCA protects you, your rights and how to complain on the FCA website.
We can advise you on whether combining or consolidating your pension pots would be in your best interest. To do this we will review your current pension charges, past performance and risk profile to make an assessment.
You can transfer your defined benefit pension to a defined contribution pension but new regulations mean you must receive financial advice before scheme administrators will allow you to transfer any defined benefit pensions with a cash equivalent transfer value of £30,000 or more, and will require confirmation from a financial adviser that advice has been given before transferring any funds.
Annuity questions
As you near retirement, your pension provider may offer you the option of buying an annuity through them. Whilst this is an easy and convenient option, your provider won't necessarily give you the best annuity rate for your hard earned savings.
To help you get the best rate, be honest about your health status and if you're a smoker. Certain health conditions may mean you could qualify for an enhanced annuity, which could pay up to 25% more.
The annuity rate you receive will depend of a number of factors, including:
- Pension pot size
- Your age
- Flexible options you select
- Any advice fees you pay
- Current annuity rates
- Your health and lifestyle
- If you take tax free cash
- Any tax you need to pay
Find out more about enhanced annuities
However there are a number of options you can take to ensure a beneficiary can still benefit from your pension savings or annuity income.
Value protection
Value protection allows you to protect all or part of the fund used to buy your annuity, paying a lump sum outside of your estate.Guarantee periods
Taking the option of a guaranteed period means you can protect your annuity for a specific number of years and your income will still be paid even if you die before the specified period is up. Selecting a guarantee period will provide a slightly lower level of income, but it guarantees that your estate continues to receive the income.Joint life annuities
A Joint Life annuity will pay you an income for the rest of your life. It will then go on to pay an income to your spouse, civil partner, or chosen beneficiary for the rest of their life after you die. A beneficiary is someone who is either married to you (including civil partners), your chosen beneficiary or someone who is financially dependent, or dependent due to disability, on you at the date of your death.Value Protection allows you to protect all or part of the fund used to buy your annuity if you die. The amount paid depends on when you die and whether you’ve chosen for a beneficiary to receive your annuity payments.
If you haven’t chosen a beneficiary’s annuity, when you die your annuity provider will firstly add up all the income payments paid to you before tax. If this is less than the amount of value protection you chose we will pay the difference as a lump sum.
If you have chosen a beneficiary’s annuity as well as value protection, when you die, your annuity provider will wait until your beneficiary also dies, and then add up all the income payments paid to both of you before tax. Similarly, if this is less than the amount of value protection you have chosen, your annuity provider will pay the difference as a lump sum. If you die before age 75, the amount paid to your nominated beneficiary will be tax-free.
If you die aged 75 or older from tax year 6th April 2017 onwards, the amount paid will be taxed at the nominated beneficiary’s personal rate of income tax.
How value protection works - a scenario
Jean bought an annuity with £50,000 in 2015. Jean passed away having received a total of £4,000 income by this time. As she had chosen to have full value protection, a payment of £46,000 would be made; if not, Jean's annuity payments would stop. If Jean is under the age of 75 she will receive this payment tax free but there may be tax to pay of death from age 75.
Any reference we make to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which can change.
You can normally buy an annuity from the age of 55. But don’t leave arranging your pension income to the last minute. Annual forecasts from your pension provider should give you an idea of how much pension savings you have and they may send you an annuity quote some time before you plan to retire.
It’s a good idea to start planning your retirement about 12 months before you plan to take an income from your pension. If you have problems tracking any down, the Pensions Tracing Service should be able to help. Once you’ve gathered all your pension information - around six months before your retirement date - you should talk to a pension specialist to discuss your income needs.
Our retirement advice service can discuss your personal circumstances and retirement needs and advise you how you buy an annuity if that is the best course of action.
You should also receive an information booklet about your State Pension rights at least four months before you reach retirement age detailing your pension entitlements.
Most people don't realise that they would be far better off if they took the open market option and shopped around for their annuity. The trouble is, it’s all too easy to accept the first offer you get from your existing pension provider.
Things to consider
The difference between the worst and the best basic rates available can be huge. However this isn't the only consideration, if you’re in poor health, a heavy drinker, or a smoker, you could qualify for an enhanced annuity. You should also look at whether they are offering a single or joint-life annuity and whether it’s a level or escalating annuity.
Before you sign up with your existing provider it's worth remembering a few key points:
- All pensions are portable and everyone has the right to look for the best offer available. And it's not difficult to shop around with the help of an expert. What's more it could make a difference of thousands of pounds to your retirement income every year.
- It's not just a matter of getting the best rate; it's also important to choose an annuity that suits your needs. Not all annuities are the same, and if you don't choose carefully, you could be missing out on the right product for you.
- You can't change your mind once you have taken out an annuity. So, you need to be sure that you've got the best deal and the provider you've chosen is financially secure.
When deciding which option to take at retirement there is a lot to think about and our expert pension and retirement advisers will ensure you make the right decision to suit your retirement needs.
Visit the Annuity Shop if you're certain an annuity is the right option for you, but you'd like us to shop around to find you the best deal.
Whilst there are many annuity providers in the market, the types of annuities available generally fall into one of three categories:
Lifetime annuities
Lifetime annuities give you a defined regular income which is guaranteed for the rest of your life. There are a number of options you can add to a lifetime annuity to protect your annuity income for your family members if you pass away, for example value protection.
Enhanced annuities
An enhanced annuity could mean you receive a increased annuity rate compared to a lifetime annuity if you're in poorer health. Like a lifetime annuity, enhanced annuities pay a regular, defined income until you pass away.
Each annuity type has its own advantages and disadvantages, and we recommend you get professional financial advice about your pensions so you can get the most for your money in retirement. Once you buy an annuity, you can't normally change any part of it which is why you need to be sure you’ve made the right decisions before you commit.
An annuity pays a guaranteed income for the rest of your life (however long you live). If you suffer from a medical condition or lead a lifestyle that could shorten your life expectancy you could boost your income further (this is called an enhanced annuity).
If you value the reassurance of knowing you'll receive a guaranteed income every year for the rest of your life, without taking any investment risk, an annuity may be the right product for you.
Payment frequency
You can choose how often you want to receive your income: monthly, quarterly, half-yearly or yearly.
Annual increase
You can decide whether your annuity will pay a fixed income or one that increases to protect you against inflation. A level annuity may provide a very comfortable income today. However in ten or twenty years’ time inflation will reduce its value substantially. An escalating annuity which increases with inflation will initially provide a lower income, but its value over the years will give you consistent buying power for life. Alternatively, you can select a fixed percentage increase – say for example 3% - which would provide a consistent annual increase year on year regardless of whether inflation is higher or lower.
Other Options
You may also consider adding value protection and guarantee periods to your annuity to protect the value of the fund used to buy your annuity for a family member or beneficiary in the event of your death.
Who is a Pension Annuity suitable for?
A Pension Annuity isn’t for everyone, have a look at the below points to see if it is a product you should consider for your retirement.It may be suitable for you if:
- You want your dependent(s) to receive an income if you die before they do
- You want an income payable for your lifetime with the option to purchase one that increases annually to protect you against inflation
- You are generally risk adverse and you don’t want your pension pot to be subject to any investment risk
- If you or your partner have certain health risks, you may receive a higher income
It may not be suitable for you if:
- You want the flexibility to withdraw cash from your pension as and when you choose
- You want a ‘maturity’ payment
- You are likely to want to change any of the options on the plan once it has started
- You want your income to vary depending throughout the duration of your plan
Other options
- The Pension Annuity cannot be cashed in or surrendered at any time
- Purchasing a Pension Annuity is a once and for all decision. The options you select when you buy the annuity cannot be changed later on
- Annuity payments are classed as income and are subject to income tax, and could affect any State Benefits you claim – it is worth seeking advice from a financial professional to see what income tax you may be liable for
- Depending on how long you live, you may receive less than you paid for your annuity
- Ensure you outline any medical conditions you or your partner have as it may mean you receive a higher annuity income