Five steps to getting the most from your pension savings

Bob Bullivant, chief executive of broker Annuity Direct, recommends the following:

1. Check the small print on your pension

You may already have a guaranteed annuity rate that will be difficult to beat elsewhere. In some cases, you may be able to take more than the usual 25% tax-free lump sum. Or there may be punitive exit penalties if you cash in your pension right now.

2. Decide if you want a single or joint annuity

The latter will pay out to your partner after you die, but it means you will initially receive less income. But can your spouse afford to live without your pension?

Find the best annuity rate for your circumstances

3. Do you want your annuity income to increase every year with inflation?

Again, this will mean receiving less income initially than a standard "level" annuity, but will protect your buying power in future. With inflation currently at 2.6%, consider how much your annuity income may be worth in 20 years' time.

4. Health

There are hundreds of health and lifestyle issues that can affect your retirement income. Any medical condition should be declared to your insurer to see if you qualify for an enhanced annuity.

5. Finally, shop around for the best possible rate

An independent annuity broker can help with this and all the steps above. They will scour the entire market and find you an income that is on average 20% higher than the one offered by your pension provider.

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