SAGA — Doing things properly

Worked examples of increases to annuity rates, by using the Open Market Option.

The examples below are real life cases, however to protect the individuals the names have been removed. Figures quotes are gross, and after any tax free cash has been taken.

Example 1 – Impaired

A male client aged 59 had a history of two types of cancer over the last 10 years, and was also an occasional smoker.

The existing pension company that the client held his fund with offered an income of £4095.84 (7.0%) pa based on a fund value of £58000.

However after the fund had been placed on the Open Market, an alternative company specialising in impaired lives or clients with poor health was able to offer in income of £5356.44 (9.2%) pa, giving an improvement in rate of 31%.

Example 2 – Impaired

A male client aged 58, currently suffering from cancer, was offered a rate through his existing pension company of £4919 (5.0%) pa, for a single life annuity paid monthly, with a 5 year guarantee, based on a fund value of £97000.

By exercising the Open Market Option, this client was able to place his fund with a specialist annuity provider who offered an income of £8347 (8.6%) pa. This meant he was able to increase his income by 70% with the annuity set up on the same basis.

Example 3 – Enhanced

A female client aged 64, in good health, and a smoker was looking for an income from her pension based on a single life annuity, paid monthly with a 10 year guarantee.

Her existing pension company offered £1043.00 (6.2%) pa based on a fund of £16725. Once the client decided to use the Open Market Option she was able to obtain an enhanced annuity rate on the same basis with a company specialising in improved rates for clients that smoke.

This company offered £1336.68 (7.9%) pa, which is an increase of 28% on the original annuity.

Example 4 – Good health

A female client aged 60, who was in good health and was a non smoker was able to increase her pension income simply by using the Open Market Option available.

This client was offered £1923.36 (6.3%) pa based on a fund of £30155 via her existing pension company on a single life basis, paid monthly. The client was able to increase her income to £2059.00 (6.8%) pa, an improvement of 7%, simply by buying the annuity on the Open Market.

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