Redundancy Payment; Investment Dilemma

Tilley64

Hi,

I am new to this forum and have recently been made redundant after lengthy service with a company which had a defined benefit pension scheme and a generous redundancy scheme. I appreciate that this means that I am in a more fortunate position than many who are currently losing their jobs.

My redundancy package is approximately £100k and my employer has informed me that I can use all or some of this sum (tax free) to purchase a fixed annuity payable at 60. I am 44, male, in good health and a non-smoker and the annuity rates which I have been offered are:

• £9.41 buys £1 of single life annuity or
• £10.86 buys £1 of annuity with a 66% surviving spouse’s annuity.

I plan to take the first £30k of my severance payment as a tax free lump sum but am struggling to understand exactly what my options are for the balance.

My queries are:

1. How do the annuity rates I have been quoted compare with what is available commercially and is buying a fixed annuity which is not payable for 16 years a bad idea in the current economic climate (or generally)?
2. Taking the whole £100k in cash will mean having to pay tax at 40% (plus national insurance?) on £70k. This will give me flexibility but can I realistically expect to be able invest the net sum in a way(s) which will match the annuity rates that I have been quoted?
3. Are there other tax free/efficient investments (personal pension, Free Standing AVCs, SIPPs etc.) which I can request/insist that all or part of my redundancy payment is paid into and if so, which would be the best option?

I am currently abroad planning to do some voluntary work and have limited internet access and no easy way of getting conventional financial advice. I would be very grateful for any advice and/or an indication of where I can get more information.

Thanks,

Tilley64