Annuity help needed please

saloo

Hi
Thanks for reading this.
My problems is this.
My father (65 in November 08) and now living on France.
Wife is 64.
Both in good health.
Dad has just had a statement from his pension co. telling him what he can roughly expect in November (obviously this can change)
The fund has dropped £10k this year, and the fund is worth £47K at the moment. He has been told he can take 25% lumpsum, and they will invest the rest in an annuity, or he can transfer to another annuity elsewhere for £110 fee.
Where would be a good place for him to start looking at the option of buying an annuity elsewhere.?
I also thought that pension funds were put into a 'safe' area for the last 5 years of their lifespan to avoid having to take such huge drops (or gains) Is this the case, and would he have a case to argue?
Any advice would be really appreciated.
Kind regards

jamesd

He should find an independent financial adviser (using all three words in their title, not just financial adviser) from unbiased.co.uk . The commission on an annuity purchase can be expected to pay the full cost of the adviser and the commission can't be avoided by buying direct or from the pension investment company because they just keep it, so he loses nothing by getting help. Seeking one in your area if they no longer have a UK residence might be wise.

He should also consider any risks to his life expectancy, like smoking or higher than ideal weight or any other medical problems for either because those will generally increase the amount available from enhanced rate or impaired life annuities. A standard annuity will not pay more for those things and most pension investment companies only offer standard annuities in their standard letters.

There are some investments that can be held in pensions that would change to lower risk investing. There are also some pension schemes that would do this. A drop of only 10% suggests that that may have been done in his case, since pure equity use could have fallen by 20% or more. It's usually up to the person managing the investments (not just holding them, but choosing where to invest) to choose to buy investments that adjust as retirement approaches or to act to switch their investment choices to lower risk ones. If he hasn't been paying a fee for investment advice he has probably been the person responsible for doing those things.

Now is a fairly bad time to be selling investments so it's worth considering whether he needs all of the money or only some of it. It's not at all hard for an IFA to arrange to buy an annuity with some of it or to invest it and pay less than the highest possible income from it so that the investments have time to grow.

He should be sure to mention that he lives in France right at the start of any discussion because there are regulations that will prevent a lot of IFAs from advising him because they need a specific permission to advise foreign clients.

He should also check whether he'll have French tax to pay on any lump sum that he takes. It wasn't the case last year but there may have been changes this year.

The option not to take an annuity is called income drawdown.

dunstonh

The fund has dropped £10k this year, and the fund is worth £47K at the moment. He has been told he can take 25% lumpsum, and they will invest the rest in an annuity, or he can transfer to another annuity elsewhere for £110 fee.

You cannot be charged for the open activating the open market option on the selected retirement date.

Where would be a good place for him to start looking at the option of buying an annuity elsewhere.?

An IFA. Either actual or discount. He may find many are not able to transact with him unless he comes back to the UK (MiFID rules introduced Nov 07).

I also thought that pension funds were put into a 'safe' area for the last 5 years of their lifespan to avoid having to take such huge drops (or gains) Is this the case, and would he have a case to argue?

Only on funds with that option. Most do not have that option so it is the responsbility of the individual to switch fundsor their servicing IFA to remind them to switch funds (only if it is a servicing IFA, not a transactional one).

EdInvestor

saloo wrote: »

He has been told he can take 25% lumpsum, and they will invest the rest in an annuity, or he can transfer to another annuity elsewhere for £110 fee.

He can aslo put the money into something called "Income drawdown" (after thaking the 25% cash) which means it remains invested and he takes an income from it, this can be up to 120% of the annuity rate and can be changed every year to suit circs.

This would offer the chance in longer term to recoup any losses.The fund could be kept in cash for the moment to await more stable markets.This would normally be done via SIPP, which is now a cost effective option for smaller funds and can be operated online, which can be helpful for people overseas.

You may like to look at www.h-l.co.uk which offers both a SIPP for drawdown and an annuity purchase service and IIRC will act for expats. www.sippdeal.co.uk is another one worth looking at.

To see what annuity rates might be available, input the details to the pension annuity section of this site:

www.fsa.gov.uk/Tables.

Although Dad may be unhappy about the recent 10% fall in his fund, if it had been put somewhere "safe" 5 years ago, it would not be worth anything like what it is now as that was at the time when the market was at its lowest level since the dotcom crash.It has gained substantially since then, despite recent losses.The big disappointment in recent years is the fall in annuity rates, caused by people living much longer.

If Dad also needs to check out his state pension(s) he can get a forecast here:

https://www.thepensionservice.gov.uk

Note BTW that as he is resident abroad he can get his private pension paid gross of UK tax and then pay French tax on it - if this will benefit him.The state pension is also taxable, but the tax free allowance for those over 65 in the UK is now just over 9k and going up to 10k pa. so there may be no advantage.