Forced to be poor?

Dora_the_Explorer_5

I'm exploring things I don't want to....please help. I have £54k stuck with the Pru from a divorce pension splitting order. Pru tells me it will allow me to 1) buy an annuity from any provider 2) transfer to stakeholder pension 3) transfer into an occupational pension.
I'm 64 next birthday, female, no partner or children. Have £70k capital which I intend to start spending at the rate of £10kpa from age 75 and live on benefits probably in a care home from age 85 if I live that long.
I have neither a stakeholder pension or occupational pension.
To sum up - I want to enjoy the most money I can and try to ensure there's nowt left when I kick the bucket.
Looks to me like I will be forced to buy an annuity but should I use all the £54k to buy it with? Any bright sparks out there with a better solution than I seem to be being forced into?
x Dora

margaretclare

Hi Dora

You should be able to take 25% of your 'pot' as a tax-free lump sum and of course, you can spend that however you want to! Then buy an annuity with the remaining 75% to give you a regular income.

I'm sure one of the real experts will be along soon, though, so don't take my words as gospel.

Best wishes

Aunty Margaret

dunstonh

You should always take the tax free lump sum unless the total amount improves the annuity rate you get on the whole amount. However, you would need to compare this against a purchase life annuity plus the pension annuity to see which gives the highest amount.

It also depends on whether you want and need the capital.

EdInvestor

Hello Dora

Have you already retired? Do you need income now or is the plan to go on working till 75? What's your position re state pension/benefits?

Dora_the_Explorer_5

Many thanks to Margaret, DD, Ed - Didn't know there were two types of annuities, is one better than the other? I'm a heavy smoker and know that effects rates.
Just to check - looks like I should take the 25% as it's tax free. I'm claiming state retirement pension and getting the max I'm entitled to, no unclaimed benefits - I have too much capital (as if) and also do a little paid sessional work. I would like the maximum income possible starting from now. I'd just like to say I really appreciate the advice I'm getting from people. x Dora

dunstonh

purchase life annuity rates are usually a little higher than compulsary purchase/pension annuities. However, some pension annuities have guarantees and they also tend to get better, the larger the pension fund is. Thats why you need to compare.

As a smoker, you should see an IFA as smokers rates are much higher than non smokers. The Pru will only offer you one rate, which will be lower than you can get on the open market option.

EdInvestor

Purchase life annuities would only apply to the tax free cash, not the main poension fund, and usually are a much better deal when you are a lot older. Smoker's annuity sounds like the best idea.

How are you saving/investing the capital, which will go up to 83k (and do you own your own home, BTW?)

oceanblue_3

EdInvestor wrote:

Purchase life annuities would only apply to the tax free cash, not the main poension fund, and usually are a much better deal when you are a lot older. Smoker's annuity sounds like the best idea.

How are you saving/investing the capital, which will go up to 83k (and do you own your own home, BTW?)

Hello Dora

Dunstonh is right to steer you in the direction of enhanced annuity rates; it is exactly what I would do for myself, and it is guaranteed to provide you with a much higher income than would be provided by Prudential. The next step is to find an IFA you feel you can work with; try this website http://www.unbiased.co.uk/ to find your nearest IFA.

Good luck!

Dora_the_Explorer_5

Thanks again everyone. Ed, my capital currently is earning me about 3% and once I have the annuity sorted out will do something to improve things. Personally I'd rather keep it in gold bricks buried in the garden! Don't like stocks and shares one little bit.
Ocean, thanks for the url. There's no IFA especially near me but have had a quote from an IFA with Blackstone Moorgate for £3860 pa from £54k who will do it for a fee. If anyone knows if this can be improved on I'm all ears. Thanks again - Dora

EdInvestor

Dora_the_Explorer wrote:

Thanks again everyone. Ed, my capital currently is earning me about 3% and once I have the annuity sorted out will do something to improve things. Personally I'd rather keep it in gold bricks buried in the garden! Don't like stocks and shares one little bit.

I can quite understand Dora, taking risks is not what you want to do if you can avoid it.The only problem with playing safe is that inflation will reduce the spending power of your capital and income ( other than the state pension) by around half over 20 years, so do bear that in mind if you think you'll live that long.

dunstonh

There are also investment areas that are not as risky as stockmarket but offer greater potential than a bank or building society.