Making the Most of Your Pension

You save money in your personal pension for the majority of your working life but is the return you receive at retirement the best available? If you automatically take the retirement benefits from your existing pension provider you could be losing out.

In most cases you could improve your retirement income by looking at the Open Market Option (OMO) which is available under the majority of pension contracts. Not only could the potential income be better on the open market but many annuity providers now offer impaired or enhanced terms for smokers and/or those with existing or potential health problems (time to cancel that gym membership and start smoking 40 a day!). There are also alternative retirement options which may instead be suitable for some clients.

Here are a couple of examples:

Mr French
Mr French was approaching his 65th birthday and was looking to retire. He had a pension with AXA Sun Life which he wished to take. Quotes were received from AXA Sun Life which offered him £3,632.16 per annum on the parameters required. He came to us to discuss the figures and on looking at the OMO it was found that Aviva (Norwich Union) could offer Mr French an additional £486 per annum.

Mr French also took his maximum tax free cash at 25% and as he had no immediate need for the money he decided he wanted investment advice. He hadn't used any of his ISA allowance so was able to invest £10,200 into an ISA for the 2009/2010 tax year and set aside another £10,200 for the 2010/2011 tax year.

Mr Day
Mr Day was approaching his 60th birthday which was the retirement date of his Abbey Life pension. He had received a quote from Abbey Life offering him an annual income of £2,798.40. Mr Day had a history of medical conditions. However, Abbey Life does not offer enhanced terms so this could not be reflected in Mr Day's quote.

In looking at the OMO, we sent Mr Day's medical information to a number of companies who offered enhanced rates. This was to see what enhancement, if any, Mr Day could receive. Mr Day did qualify for an enhancement and the best rate available was with Canada Life who quoted an annual income of £3,599.00. This meant that we had beaten the original annuity rate by £800.60.

Nowadays, even medical conditions such as high blood pressure, high cholesterol and diabetes could enable impaired life terms to be granted, i.e. a higher retirement income would be received.

The above cases highlight some of the points which virtually all people with personal pensions need to be aware of at retirement. Many are not, despite insurance companies now being more proactive in the literature issued regarding the options available.

All people approaching retirement should seek independent financial advice. Why not contact our team on 01206 217614 or email