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With annuity rates at an all-time low it is difficult for those retiring to make sure they have the income they will need in retirement. Annuity rates are largely linked to the return on gilts which have fallen dramatically in recent years as investors look for a safe haven away from equities.

There are a number of ways of increasing your income in retirement by making sure that you get the best possible deal. Buying an annuity is one of the most important financial decisions you will ever make as your standard of living for the rest of your life will be defined by the decision you make.

Before you purchase an annuity you need to decide exactly what you need from the annuity. There are a number of options available and all of then affect the amount you will receive. Some of these will be essential for you while others may be nice to have but you have to balance this with the reduction in income that they cause.

The first option to think about is indexing. You can choose between an annuity that pays a level amount for the rest of your life or one that increases over time. There is even a choice of which index to use for the annual increases. A level annuity will give a higher income initially but inflation will reduce the benefit of this in the long term.

Secondly you need to decide if your partner is to continue to receive an income if you were to die before them. For single people this is easy and many couples will not feel they have a choice. The difference in the amount of income offered can be substantial especially if one partner is much younger than the other but the benefit of the higher income has to be balanced against the potential risk of the remaining partner not having enough to live on.

The third thing to decide is whether you want the annuity to be protected. The protection is against you dying when very little of the fund has been paid out and typically means that if you die within a set period of the start the money for the remainder of the period passes to your beneficiaries.

If you do not need the lump sum from your pension and were thinking of including this in your annuity, it is worth taking the sum and buying two separate ones. This is because the lump sum can be used to buy a much more tax efficient annuity where the majority of each payment is treated as a withdrawal rather than income. This can save nearly 50% for additional rate taxpayers.

Another key consideration is your health and lifestyle. Annuities are calculated based on your life expectancy and anything which reduces this will tend to have a really positive impact on the amount you are offered. Even being a smoker can boost the annuity by a substantial amount.

Once you know the type of annuity you are looking for it is time to find the best provider. A qualified financial adviser or specialist annuity broker can make sure that you get the best possible deal. Those with more modest funds may find a comparison website is adequate although any advice will be generic and limited.