Enhanced annuities 'to play bigger part of retirement planning'

16 November 2011

More older people could be set to turn to enhanced annuities in order to boost their finances during their retirement years as a result of factors such as record low interest rates.

Skandia's head of retirement planning Adrian Walker predicted that this is to be the case, while he also expects impaired annuities to become more popular as individuals are now more aware of the options available to them once they finish working.

Speaking to IFA Online, Mr Walker highlighted the importance of older people shopping around before making any final decisions, as this will give them the best chance of achieving good annuity rates and ensure they are financially comfortable for their later years in life.

Flexible drawdown

He also predicted flexible drawdown is going to become an increasingly popular option over the coming years, explaining this is only a useful option for clients who are able to secure themselves a pension income of £20,000 a year.

"Doing this means they won't be subject to the vagaries of the annuity and capped drawdown market in terms of the income they take and can use flexible drawdown to top up income when needed," he told the news provider.

This comes shortly after a study published by Alexander Forbes Annuity Bureau revealed rates fell once more in male single life annuities during October, which Gemma Goodman, head of operations at the organisation, stated was not a surprise.

Worrying trend

She said the drop represented the latest in a worrying trend for annuity rates and older people may be concerned about them due to the high rate of inflation, although new figures released by the Office for National Statistics this week showed CPI inflation fell during October.

Mr Walker also claimed a lot of individuals are delaying their retirement income planning, which may partly be in the hope annuity rates improve over the coming years.

But for those who find themselves without enough provision for later in life, other options such as equity release schemes could be among those to come into play.

Using the equity release calculator from Key Retirement Solutions could be a good starting point for those who want to learn more about how they can free up income from their property.