Is anyone here waiting to buy an annuity?

stoozie1
stoozie1 Posts: 656 Forumite
in Pensions, annuities & retirement planning
When the rates are better I mean.

If so, what rate would persuade you to buy? Where is the cash in the meantime?

If no, why have you ruled them out permanently?

There are a number of very savvy people here (not always with shared views!) And I just wanted to pick your collective brains really.
Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £2670
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Comments

  • ischofie1
    ischofie1 Posts: 215 Forumite
    First Anniversary Combo Breaker First Post
    The problem I see with annuities is that when you hand over the pot, a certain % of that will be needed by the annuity provided for them to run their business & the profits they need.
    In addition to this, they have to calculate the pension they give you based on very low returned from the pot you've given them.
    That's why for me, the annuity route will always likely be a poor 2nd to the drawdown route.
    However the annuity route is guaranteed without any investment risks. This may make it more appealing to the ultra cautious.
  • dunstonh
    dunstonh Posts: 116,318 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    When the rates are better I mean.

    Crystal ball job.
    If so, what rate would persuade you to buy? Where is the cash in the meantime?

    it would be in your pension.
    If no, why have you ruled them out permanently?

    you should never rule out any option permanently.

    Remember that annuities were also made more flexible with the changes in law in 2015. Many people are not aware of the new flexibilities in respect of annuities. Especially in the area of death benefit. Mix and match options now exist too.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • HappyHarry
    HappyHarry Posts: 1,576 Forumite
    First Anniversary Name Dropper First Post
    edited 18 August 2017 at 9:03PM
    stoozie1 wrote: »
    When the rates are better I mean.

    If so, what rate would persuade you to buy? Where is the cash in the meantime?

    If no, why have you ruled them out permanently?

    There are a number of very savvy people here (not always with shared views!) And I just wanted to pick your collective brains really.

    I have many clients who are currently in drawdown and expect to purchase an annuity in the future.

    They may not look to purchase an annuity with all their funds, but are likely to purchase a large enough annuity to cover their at least their basic expenditure.

    When? When the annuity available is appropriate, which will depend on their age / health and annuity rates.

    Many of my clients will not wanting to be managing a drawdown fund, on which their necessary expenditure is dependant, in their 80's and beyond.

    One of the great advantages of drawdown is that it allows the individual to delay purchasing an annuity until the time is right.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    First Anniversary Name Dropper First Post
    ischofie1 wrote: »
    The problem I see with annuities is that when you hand over the pot, a certain % of that will be needed by the annuity provided for them to run their business & the profits they need.
    In addition to this, they have to calculate the pension they give you based on very low returned from the pot you've given them.
    That's why for me, the annuity route will always likely be a poor 2nd to the drawdown route.
    However the annuity route is guaranteed without any investment risks. This may make it more appealing to the ultra cautious.

    In draw down you will have expenses too......fund fees, platform fees and maybe the cost of an IFA too.

    The big plus for an annuity is the lifetime income guarantee and mortality credits if you live long enough. They can be a useful part of a retirement income plan, but they need to be considered as part of a hollistic plan For example, if you have a DB pension and state pension that cover your income needs then an annuity would not be necessary and draw down might be more appropriate. Alternatively if you have a large pension pot and are conservative you might put the guarantee of an annuity over the potentially higher income from drawdown........also you don't have to put all you money on "one horse", you could use some to buy an annuity and do drawdown with the rest.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    First Anniversary Name Dropper First Post
    .......as an aside, I probably wouldn't buy a lifetime annuity at my age of 55 at current rates, whatever my situation. The return and the probability of living long enough for it to be a "good deal" are too low. However, I did take my last employer up on an offer to transfer my DC pension pot to their DB plan because at age 53, $280k bought me an inflation linked $20k annual pension starting at age 55. Assuming 2% inflation and that I live to age 85 that wold require an annual return of about 6.5% in draw down......so that's an annuity I would (and did) buy.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    stoozie1 wrote: »
    When the rates are better I mean.

    Rates for flat rate annuities aren't that bad. (Age dependent of course). At least you are not at risk of losing your capital.
  • westv
    westv Posts: 6,081 Forumite
    Name Dropper First Post First Anniversary
    Thrugelmir wrote: »
    Rates for flat rate annuities aren't that bad. (Age dependent of course). At least you are not at risk of losing your capital.
    .

    But it does introduce an inflation risk
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    edited 18 August 2017 at 11:12PM
    westv wrote: »
    .

    But it does introduce an inflation risk

    Reinvest the excess income.
  • stoozie1
    stoozie1 Posts: 656 Forumite
    dunstonh wrote: »
    it would be in your pension.
    would that not depend how far in the future the possible purchase is?
    Save 12 k in 2018 challenge member #79
    Target 2018: 24k Jan 2018- £560 April £2670
  • JoeCrystal
    JoeCrystal Posts: 3,011 Forumite
    Name Dropper First Anniversary First Post
    Despite I still got 37 years until SPA, I still want an annuity with my pension pot as I want a guaranteed index linked monthly income rather having to rely on drawing down the pension pot subject to the whim of the market. Ultimately, I just want to see my bank account getting a monthly income more than sufficient to live on without having to use any savings or worrying about the sustainability of the pension pot.

    But then, the retirement landscape is likely to be very different (and harder to retire generally) by 2040s.
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