Millions of us are keen to save money by shopping around and purchasing a wide range of goods online and by using online deposit and Cash ISA accounts.

However, we do not seem as a nation to have woken up to the fact that when we retire we need to shop around to get the most appropriate, most competitive, pension income from the pension funds we have accumulated.

Far too many people simply take the annuity offered to them when they retire. In case you are not sure, an annuity in this context is the pension income you will receive for the rest of your life which is paid for by the pension fund that you, or you and your employer, have built up. It is estimated that two thirds of people who have taken the trouble to build up a private pension fund throw away part of the guaranteed income that it can produce for the rest of their lives when they retire.

Setting up an annuity is a decision which, in most cases, cannot be changed. It is equally astonishing, therefore that so many people go ahead with the choices offered to them by the pensions provider that they built up their pension with, when that pensions provider will, in most cases, be prohibited from offering them advice.

A little knowledge

Even those who do look at the most competitive annuity rates in financial magazines or online tables can easily fall foul of the old addage that ‘a little knowledge is a dangerous thing’. For example they may not realise that some annuity companies will pay 2% more to someone living in Warrington, Cheshire than where I live in Guildford, Surrey. That may not sound a lot but if that person lives for 25 more years it can add up to a useful sum.

It is estimated that 40% of people can qualify for some type of enhancement to their annuity rates. This may be because they smoke, are seriously overweight, or have had a serious illness or major surgery. Given the odds, it really is a tragedy that so few people bother to investigate this possibility.

Our new Guide: Annuities

We have just produced a new guide which tries to explain the financial implications of some of the choices that you are expected to make when you purchase an annuity. Of course, not everyone will want to purchase an annuity with their pension fund and certainly if the total of your pension funds is over £250,000 then you should talk to us about the possibility of keeping your fund intact and drawing amounts from it each year to supplement your other retirement income.

It is also important not to wait until you reach retirement age before collecting your annuity quotes etc. With financial advisers moving to a fee basis the last thing you want to do is turn up at your adviser’s office with five different pension pots from which to purchase an annuity. We can investigate now, using specialist software, whether you can consolidate some of those pension pots ahead of time.

You can download our new annuity guide from our website at www.arch-fp.co.uk/annuities.php. If you find it helpful please email and let me know.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances. If you are thinking about purchasing an annuity then you should discuss the matter with a suitably qualified independent financial adviser such as ourselves.

If you would like to receive advice on the purchase of an annuity, or your retirement options generally, please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

The hung Parliament electoral outcome has certainly been a disappointment for markets which were hoping against hope for a clear majority for one of the parties, preferably the Conservatives. The FTSE 100 is floundering as I write this, having now fallen by 11% in the last three weeks, mainly as the result of the Greek debt crisis.

There are, of course, reasons why Gordon Brown, David Cameron and Nick Clegg will each feel disappointed today. Then there are the hundreds of people who are disappointed and angry because they wanted to vote but got locked out of their local polling stations. It is possible they will have another chance to vote within the next year or so.

As someone who takes voting very seriously I am always disappointed that so many people don’t bother. In my local constituency of Guildford the turnout was a relatively high 72.1% but that still means that one in four people couldn’t be bothered. This is strange when there were just a few hundred votes separating the Conservatives and the Liberal Democrats at the last election.

Looking on the bright side the German philosopher Friedrich von Schiller said “Disappointments are to the soul what the thunder-storm is to the air.”

The market jitters over the election result should be relatively short lived. The companies that populate the main UK stock markets derive around 70% of their earnings from overseas. Furthermore, where our clients have moved onto our new investment proposition they will also be aware that their portfolios are broadly diversified and have a large proportion which is not invested in the UK.

By far the bigger problem is Greece. We in the UK are particularly vulnerable because our indebtedness as a country is not much better than that of Greece, except for the important fact that we are expected to repay our debt over a longer timescale, so some of the pressure is off us.

Helpfully, ratings agencies Moody’s and Standard & Poor’s have said that a hung parliament will not put the AAA status of Britain at risk, repeating their earlier comments that it is the economic policy that comes from the government, not the government itself, that counts. What will be necessary in fairly short order, is a credible plan to start reducing the deficit.

The disappointment that markets, and probably most of us, feel at this time will quickly pass as the politicians sort themselves out. The bigger threat to our investments and pension funds is the uncertainty that all this is creating at a time when we are expecting to face big headwinds as a result of the problems in Europe.

The crisis for Greece that is having such an effect upon us was made much worse by the procrastination and dithering of the leaders of various European countries. Let us hope that our political leaders understand that this is a time when they need to act decisively.

As I close there is talk of the Conservatives offering one or more cabinet seats to the Liberal Democrats. Let’s hope that one of those is for Vince Cable, the Liberal Democrat Deputy Leader and Shadow Chancellor as he really knows his economic stuff.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances. 

If you would like to discuss any aspect of your financial planning please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.