guaranteed income bond

oliver_prin

I am about to by an annuity for 95K I was happy to use the whole amount as I need the income but I am being advised to take the lump sum and invest this in a guaranteed income bond this will save about five pounds per week in tax.As this is not a great deal of saving I feel the disadvantages of a GIP outway the advantages.Although my wife would get this money should I die I would possible loose capital at the end of five years and it is not inflation proof so after five years I would probably get less to reinvest and I need this income,I don't especially trust any guarantees from an insurance company, am I right.

dunstonh

What guaranteed equity bond is it? If its the keydata at 8.25% (or 8.something) then it could be good value.

As you say, its on death that it matters most as. Even if you dont want it in the end you should still take the 25% and buy a purchased life annuity instead as they have better taxation than a lifetime annuity.

oliver_prin

A figure of 5% income has been mooted and possibly Scottish Equitable to be the provider although no firm proposals have been made.For some reason not specified a purchase life annuity has been discounted, although I thought this was a good idea.

Basically I want a no risk income and as yet I cannot find any advice on the net as to what advantage a GIP would give me as I do not need the cash nor does my wife but I do need a income for life.After five years the bond would possible be lower in cash value thus giving a lower income for the next five years is this assumption correct.Any advice appreciated

dunstonh

A figure of 5% income has been mooted and possibly Scottish Equitable to be the provider although no firm proposals have been made.For some reason not specified a purchase life annuity has been discounted, although I thought this was a good idea.

That sounds like the 5-for-life product. This guarantees 5% net income for life even if the underlying investments dont provide enough for it and eventually run out.

For some reason not specified a purchase life annuity has been discounted, although I thought this was a good idea.

Possibly because the net rate isnt as good as 5% net or not good enough to make kissing goodbye to the capital a viable option?

Basically I want a no risk income and as yet I cannot find any advice on the net as to what advantage a GIP would give me as I do not need the cash nor does my wife but I do need a income for life.After five years the bond would possible be lower in cash value thus giving a lower income for the next five years is this assumption correct.Any advice appreciated

You are making the wrong assumptions about that product. Its 5% for life. It doesnt get re-rated every 5 years. Why are you not asking the adviser these questions?