The Big Question: Should I Take My Pension Right Now?
The Cost of Delay
It is worth noting that as you get older the annuity rates tend to get better. The assumption is that as you get older you will be nearer your death and therefore the insurance company will not have to make payments for as long.
Here is a table of annuity rates for different ages:
Source: Figures calculated using The Exchange 18/05/2009
Therefore, a consideration may be to delay taking an annuity.
We have calculated that if a 60 year old had a £50,000 fund which remained invested assuming a growth rate of 5%(net) they would have a fund of £57,881.25 at age 63.
Assuming annuity rates remain the same, a 63 year old would receive an income of £3,937.08, using this bigger fund. The 60 year old would get £3,192.48 immediately. However, if you wait you will not get £9,577.44 over the next 3 years.
In this example our 60 year old will be age 75 before he has recovered his money and is better off by not taking benefits today.
We have run the same calculation assuming the money is left invested for 5 years and by leaving the benefits until you are 65 you will be 76 before you are better off.
Please note that each individual situation will vary and the figures above are for illustrative purposes only