Q: What happens if I delay purchasing an annuity?
Delaying purchase of an annuity could mean that rates might or might not improve.
Mike Morrison, head of pensions development at Axa Wealth, said purchasing at an older age might mean an increase in the income level - just due to the fact that annuity rates increase as you get older.
However he said it might be worth comparing the amount gained by deferring purchase with what could have been received if the purchase had not been deferred.
It might also depend on where the money is invested pending the deferred purchase.
Katherine Oxenham, business development director of Annuity Direct, cited an example where your client could buy an annuity today and receive £6,000 a year but they want to consider deferring to see if rates increase.
By deferring for a year, Ms Oxenham said the client is immediately losing £6,000.
A year later they are a year older, so if annuity rates had gone up but their pension fund stayed the same value, Ms Oxenham said they might get £6,250 a year.
She said the cost of getting an extra £250 a year means it will take 24 years to make up the £6,000 a year they deferred.
Nigel Barlow, director of technical product development marketing of Partnership, said: “It may take a long time to recover the income you have foregone.”
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