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How annuity rates really work

When it comes to that stage in life when you can no longer continue in your work, it is a good idea to have an annuity in place to replace your salary income. An annuity can provide you a regular income in exchange for a sum paid up front. Who you pay this sum to though, are the ones that set your annuity rates.

Rates Now and In the Future

The differences in annuity rates between providers can be the difference between a comfortable amount and an income that might not be enough. This is why it is very important to do your homework up front and make sure that you are getting the best deal you can possibly get. By no means are you obligated to take an annuity offer from your current pension company so the power is in your hands. Shopping around has been demonstrated to save people a couple of hundred pounds per year at the very least on their annuity.

The main benefit to going down the route of an annuity payment is that you will be guaranteeing yourself a regular income. At the moment, as the economy struggles back to it's feet after being floored a few years back, interest rates will begin to rise again. Experts believe that as the economy naturally recovers then annuity rates in the UK are due to rise along with these interest rates.

There is talk that this rise could equate to the difference of up top 20% to annuity rates if you are willing to hold off a little. A £100,000 lump sum currently yields around £5,800 for a 65 year old person in the UK. Holding out for a while, in order to benefit from this rise in annuity rates, means that you could guarantee yourself closer to £7,000 on that £100,000 lump sum.

Secure your Future

Keeping tabs on how sharply interest rates are rising should keep you in the loop as to exactly when annuity rates will spike. This is the perfect time to track these rates as the economie exits a trough and climbs its way towards the next peak. Make sure you do your homework and secure your future income.

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