Is now a bad time to buy an annuity

woderwick

I am 63 next Jan and have a very small pension pot of £21k, i have been given a forcast by my FA of about £5000 lump sum and the rest giving me £97 per month gross Frankly I could do with 25% cash free lump sum but should i wait until i am 65 hoping for an upturn from this global recession or is this as good as it will get

EdInvestor

What's the pension fund invested in?

Myrmidon_J

woderwick wrote: »

I am 63 next Jan and have a very small pension pot of £21k, i have been given a forcast by my FA of about £5000 lump sum and the rest giving me £97 per month gross Frankly I could do with 25% cash free lump sum but should i wait until i am 65 hoping for an upturn from this global recession or is this as good as it will get?

Sadly, no-one can predict the future of the markets! Though if you choose to buy an annuity now, you are crystallising any pension fund losses.

There are other considerations, however; the monthly payment you will receive depends not only on the pension fund size, but prevailing annuity rates. These, in turn, are largely determined by 15 year gilt yields, so volatility in the fixed interest market may affect your potential income.

The most important question you should ask is: do I need the money?

(You can also use this site to compare annuity quotes quickly and easily.)

dunstonh

(You can also use this site to compare annuity quotes quickly and easily.)

A good guide but unreliable. Not all options are available. Not all companies are available and the actual rates used are often out of date. In some cases 3 months. In one case from Aug 07.

The IFA will have more reliable data. So go by their figures.

purch

Is now a bad time to buy an annuity

Yes.

The yields on Gilts cannot stay this low for long, the curve will steepen.

Myrmidon_J

dunstonh wrote: »

A good guide but unreliable. Not all options are available. Not all companies are available and the actual rates used are often out of date. In some cases 3 months. In one case from Aug 07.

The IFA will have more reliable data. So go by their figures.

You are correct, of course. The FSA tables are useful as a general guide and nothing more...

However, much as I hate to be skeptical, I can't see many IFAs delving too deeply into 'Whole of Market' deals on a £21K pot. That's about £300 commission (or a steeper, seemingly unreasonable fee option for the client) in total!

purch wrote:

The yields on Gilts cannot stay this low for long, the curve will steepen.

Annuity rates are based on 15 year gilt yields rather than short-dated coupons, and the market is pricing yields at near 4.50% (contrast 2.00% for up to two years); not all that bad in recent history.

It's a minefield, though - hence the important question: do you need the money right away?

dunstonh

However, much as I hate to be skeptical, I can't see many IFAs delving too deeply into 'Whole of Market' deals on a £21K pot. That's about £300 commission (or a steeper, seemingly unreasonable fee option for the client) in total!

Many wouldnt both but not all. A small local independent would probably do it. The workload on an open market option isnt too bad for a pot that size coming from a single source. It really depends on what other work they have on at the time. This time of year tends to slow down and December generally dies a death. Try it in March/April then its a different matter

EdInvestor

dunstonh wrote: »

Many wouldnt both but not all. A small local independent would probably do it. The workload on an open market option isnt too bad for a pot that size coming from a single source. It really depends on what other work they have on at the time. This time of year tends to slow down and December generally dies a death. Try it in March/April then its a different matter

The client also needs to be adequately informed to ask for it.How many are?:rolleyes:

purch

Annuity rates are based on 15 year gilt yields rather than short-dated coupons, and the market is pricing yields at near 4.50%

Duh !!!

The Yield curve will steepen.

woderwick

Thanks for the input chaps,

The 21k is made up of two plans, one of 9k taken out in 1983 with Clerical Medical with a guaranteed annuity, the other 12k taken out in 1998 now with C/M My FA advised keeping the 9k one til I am 65 for a better yield.

Any thoughts

Myrmidon_J

purch wrote: »

The Yield curve will steepen.

15 year gilt yields have remained remarkably stable (between 4% and 6%) for the past ten years... In the past five, the average is around 4.60% with a standard deviation of less than 0.40% - do you envisage a return to the high inflation and high interest rates of the latter half of the last century?

If so: on what grounds? And do you know something that everyone else is utterly unaware of?