Take annuity now or later?

Bogle

Another important point is that some of the leading insurers take things like your postcode into account now, I know L&G and Aviva do. The ones quoted in the papers use an average postcode and assume your a non smoker usually. As dunston says, rates change sometimes on a daily basis, so by the time these things go to print they could be wrong!!! and are only a guide.

Your best bet is always via a financial adviser, some people think they are getting a better deal by going direct as they dont want an adviser getting paid a commission or having to pay a fee. What people sometimes dont realise is that you get the same rate by going direct (and sometimes you get worse rates going direct).

If you do insist on going direct, then the big annuity players are Aviva, Aegon, Prudential, L&G and Canada Life. At the very least RING all 5 of them and get a quote.

jamesd

ragtagbobtail, do consider that at 60 about half of people will live another 18 years, not just ten. It's not worth taking an annuity if you don't need the income. Better to stay invested. With stock markets depressed it's a particularly poor time since you can reasonably expect 30% growth in pension pot value over the next few years, depending on just how you have invested your money within the pension.

Don't even think about buying an annuity without visiting unbiased.co.uk and discussing it with an IFA. The IFA will be paid out of commission that the insurance company would keep for itself if you bought direct, so it's effectively a free shopping around service to get you the best deal.

ragtagbobtail

Thank you all for the very useful information. I have managed to find out that i can leave the stakeholder plan and re-join as a new member. Both my employer and L & G said yes. I don't need the income now but am worried the whole pot will be worth the same annuity income a few years down the line. I am tempted to take it to access the tax free lump sum (how long will they remain untaxed?) and start again. My generous employer's contribution and the additional income i'm getting from the annuity could then be added to my contributions indirectly from my salary Any additional thoughts? And what if you give up smoking after you have taken the annuity? Do they reduce your income if you give up smoking?
Many thanks to you all.

dunstonh

I don't need the income now but am worried the whole pot will be worth the same annuity income a few years down the line.

Thats a possibility but so is it increasing in value (depending on your investments).

I am tempted to take it to access the tax free lump sum (how long will they remain untaxed?)

There are no proposals to stop the tax free cash and to do so would require primary legislation and consultation. The last major pension changes took over 5 years to come to fruition. Taking the 25% and leaving the 75% invested would require you to do a pension transfer and would reduce the death benefits and also take the 25% out of a tax free environment and bring it into a taxable one. If you dont need it, dont take it.

And what if you give up smoking after you have taken the annuity?

Dont worry about it. As long as its not just after taking it out and you have not made any attempt to stop. The application is a snapshot on what your current and foreseeable future is.

ragtagbobtail

Thank you very much dunstonh for your reply.

The investments are UK Equity, cash fund and the bulk is in Fixed Interest. There is some growth with each new statement. I'm 60 and they have 62 as my retirement age. Colleagues with further to go have been seeing a loss each statement. I had recently seen an annuity chart in the Which? magazine which looked pretty bleak dropping by nearly 50% since 1994. I fear i will be throwing every penny i can at the stakeholder for the next 2 years and the general consesus seems to be annuities will never go up and are very likely to go down. An article in the Daily Mail 28 Oct states that those close to retirement should capitalize on the recent gains and buy their annuity now.
L & G have told me i can take the pension and rejoin as a new member so i would be taking the 75% as an annuity. Thank you very much once again for your helpful answers.

ragtagbobtail

Thank you jamesd for the advice about unbiased.co.uk and i will also seek independent advice.

dunstonh

Colleagues with further to go have been seeing a loss each statement.

Stockmarket dropped last September, then rose to the end of the year and dropped again hitting a low point in March. Since then, there have been record gains. Timescale to retirement has no impact on the statements. How they are invested and the date of the statement will depend on whether they have gone down or up.

had recently seen an annuity chart in the Which? magazine which looked pretty bleak dropping by nearly 50% since 1994.

Rates are certainly lower than in 1994 but the last 4 years they have been increasing. They have dropped a little in the last year though.

the general consesus seems to be annuities will never go up and are very likely to go down.

Evidence doesnt support that though.

An article in the Daily Mail 28 Oct states that those close to retirement should capitalize on the recent gains and buy their annuity now.

The media have no comeback on advice they gave. The Daily Mail famously told pensioners to get out of corporate bonds and invest in tech funds back in the late 90s. They ran that article without any consideration for risk differences and tech stocks at that time were at 90% of their peak and we know what happened next.

The problem is that you dont know what the future holds. Whilst the annuity rates had been increasing bar the recent drop, the scale of the increase and decrease over the last 5 years is very small. You dont even have to buy the annuity now if you dont want to. You can go with income drawdown for a while and wait until the annuity rate is more attractive for you.

ragtagbobtail

Many thanks once again dunstonh.