Pension Annuity

Just_landed

Hello wise people :- I would appreciate your views on an annuity I have been offered by Scottish Mutual. Of a pension pot of £10,993.53 I have been offered £574.08 a year (level) if this is right I would have to live till I was a sqillian years old to get my money back, in fact if I could put the money into a savings account at 5.3% interest or above (which is quite achievable) I would earn more interest / money and still have the capital to leave on my death. Can I do anything, I will be seeing an IFA soon but I cannot believe the return is so poor.:eek:

EdInvestor

Have you tried checking what othrs will offer here:

https://www.fsa.gov.uk/tables

Is there a guaranteed annuity rate on the policy?

How much tax free cash will you be taking?

MikeJones_2

Hi Just landed,

An IFA will be able to guide you along the myriad of options available to you, although the size of the pension fund you have mentioned in your post may be a restricting factor.

A better annuity might well come from the response to questions such as:

- Are you in good health?
- Do you smoke?
- Do you or have you ever taken prescriptive medicine?
- Have you ever been hospitalised for a medical condition?
- Do you want to provide for dependants?
- How do you feel about guarantees?
- What is your families health history?
- What is your attitude to risk?

That's why a specialist IFA, with expertise and experience in 'at retirement' products, should be able to be of service to you.

(I'm not an IFA).

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser.

dunstonh

Is this the only pension you have?

Scot Mut will only offer the options you ask them to provide (and only if they offer those options as a company) or a default or range of default options.

Annuity rates are not generally attractive until you get to around age 62 onwards. However, you do need to remember that if you had a savings account you would not have £10,993 in so in real terms, despite the lowish annuity rate, it still provides more than a savings account. Also, the annuity is guaranteed for life. Savings account rates fluctuate and there will be periods (like just a few years ago) when savings rates are 3%.

Just_landed

Thanks for your replies people. I have checked the F S A tables & they do give better rates. Its not the only pot of I wish I could say GOLD but I will be over the £17,000 in some ways mores the pity. The pension pot is a “with profits” could I just leave it where it is say for a year and not pay anymore in, could the pot grow? :think:

EdInvestor

Are you ABSOLUTELY SURE this pension does not have a valuable guaranteed annuity rate (GAR) attached?

What kind of pension is it?Is it a Retirement Annuity Contract?

GARs are normally only available at the retirement date specified on the contract (which is when?) But they can result in a MUCH higher income than an ordinary annuity will offer.

dunstonh

The FSA tables are not a reliable source of data for annuities. Its a good guide but the actual rates are very rarely accurate.

As Ed says, you need to check if there are any guaranteed annuity rates. They may only kick in at a certain age or under certain annuity options. If you havent requested those particular terms or you are not quite at the required age they will not remind you that they exist. It is the job of your adviser to find this information out and if you dont use an adviser you take on that responsibility. Not the insurance company.

Just_landed

Hi again I have read through the paper work that came with the pension offer, there is no mention of G A R and they only guarantee the pension for 5 years. The offer is for the date specified on the contract. The name on the paperwork calls it a personal pension plan / Personal Contribution. I do not know what else to say. With thanks for your help Just Landed.

seven-day-weekend

Hello. I don't understand private pensions at all but would just like to say that my husband has an AVC pot connected to his Teachers' pension of just over £10,000 and it gives him £592 (level) a year (Prudential and he took it at 55).

This looks similar to yours but if this is in no way comparable, the experts will soon say so!

And actually, won't both you and my husband get your money back in 20 years? I don't know how old you are but , my husband has a good chance of living to more than 75 (having taken it at 55).

dunstonh

Just_landed wrote: »

Hi again I have read through the paper work that came with the pension offer, there is no mention of G A R and they only guarantee the pension for 5 years. The offer is for the date specified on the contract. The name on the paperwork calls it a personal pension plan / Personal Contribution. I do not know what else to say. With thanks for your help Just Landed.

They wont offer the information to you. They are geared to deal with advisers and advisers will ask the questions. If you dont use an IFA and do it yourself then you need to be asking the questions. You are taking on the legal responsibility for finding out what is available and when.

You need to specifically ask if there are any guaranteed annuity rates or other guarantees on the policy which are available now or in the future. If so, what are they.

Just_landed

Thanks dunstonh I will ring Scottish Mutual tomorrow and ask those Questions and see what they say. :beer: