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Maximising income at retirement

Helping your employees ‘shop around’ to maximise their income in retirement

At retirement, the majority of scheme members use their accumulated pension fund to buy what is known as a ‘lifetime annuity’. This is a guaranteed income, paid to an individual for the rest of their life by an insurance company. Members can choose to have various features included in their annuity, such as:

  • a guaranteed period
  • an income that will continue to their spouse, partner or dependents should the member die before them
  • an income that increases throughout their life

There are different costs attached to each option, and once the member has purchased their annuity the decisions they have made will apply for life. It is therefore vital to ensure your scheme members are making the right choices for their individual circumstances.

Many people automatically take the retirement income offered to them from the scheme’s provider and they risk substantial amounts of money by doing so. It is a legal requirement to offer defined contribution scheme members the ‘open market option’. This is the member’s right to purchase their annuity from an insurance company of their choosing. The difference between the best and worst standard annuity rate can be as much as 20%. That’s 20% more income every year for the rest of an individual’s life. If they are a smoker, or have certain health conditions, they may be eligible for an ‘enhanced annuity’ or ‘impaired life annuity’ – both of which can significantly improve the income they will ultimately receive.

To help our clients, Fidelius have developed a dedicated online retirement options service that outlines a member’s options, helps them consider different features and their associated costs, and finds the best available rate for their circumstances and requirements. We then help the member with any paperwork, are on hand to provide support throughout the retirement process and ensure their annuity is set up correctly and efficiently. A member can use this service for all their defined contribution pension plans, not just the scheme you provide to them.

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