With rates for annuities falling and the stock market hard to predict many of those approaching retirement maybe wondering whether now is the best time to buy an annuity or whether they should delay a purchase. We would argue the best thing to do is if you are going to buy an annuity that you do so without delay. The reason for this is that each month you delay buying an annuity is a month without retirement income from your pension fund. If you delay a year you have missed an income source for 12 months in which during the same period annuity rates could have even got worse. Of course rates might improve and you could get a higher income by delaying your annuity purchase, but there is no guarantee of this. However, if you have other sources of income such as rental income from properties or other savings then it may make sense to delay buying an annuity, especially whilst rates are so low.
One factor which dictates whether it was a good idea to delay an annuity purchase or not is to length of time you spend retired. If you do not delay and go on to live for a long time in retirement it will have been a good choice. One alternative to this dilemma is to opt for what is know as phased retirement, especially if you have a large pension fund. This allows you to split your income between a shorter term product such as a fixed term annuity, whilst also holding some money back should your own circumstances or economic factors change in the future.
One thing to note is that should your medical condition change in the future, you could become eligible for higher paying annuities with enhancements. These can pay as much as 40% more than standard annuities. In addition to this, economic factors could change which could see rates rising or the stock market performing better.
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