Which Annuity

Streeet

Hi all,

My Dad is on the verge of 'the good life'. Reaching 65 this June he recently recieved a final estimates of the pot he will have available to invest into a pension annuity.

Having done some basic reading I understand its worth while shopping around for him to get the best income. But where should I start?

Should I save my time and go straight to a finanacial advisor or is this something I can realistically research myself?

I have also seen some websites that say they will do all the research for you. Are these worth while or is there a catch here as well?

Thank you all in advance

margaretclare

Since 'A' day (6th April 2006) there are more possibilities. He doesn't *have* to take an annuity if he doesn't want to. Once he does that he loses all control of his hard-earned 'pot'. However if he really wants to go down the annuity route, there are websites which give the best annuities possible. It also depends on what *kind* of an annuity he wants. Does he want one that increases every year, is he taking his 25% tax-free lump sum, does he want to leave a spouse's pension if he dies before your Mum.

It would be better if your Dad did some of his own research and not leave it to you. To put this into context, I'm 70 and am *still* adding to yet another pension 'pot' - it has just been transferred from a stakeholder with Friends Provident and I'm putting it into a SIPP with Hargreaves Lansdown. It can stay there until I'm 75. So you see, there are all kinds of possibilities out there - it's not just simply a question of 'reach 65, draw an annuity' like a good little boy, do as you're told, there there.

This board is a good place to start. Read some of the 'stickies' here.

Best wishes

Margaret Clare

EdInvestor

The first thing he needs to do is to find how much he will be getting in the two state pensions.If he has a full record for NI and has never been contracted out, this could be 10k a year, index linked (which would need a pot of 200,000 quid to buy as an annuity) :eek:

Get the state pension forecast here

dunstonh

He would probably be best using an IFA. Many annuity companies require you to be FSA authorised to place business through them. So, in other words, they are not available direct to public. Plus, you have a range of options, as mentioned above. Also, there are special annuities depending on health and smoker status.

Going direct doesnt usually save any money either as with most annuity companies the commission is paid regardless of whether you get advice or not. If no adviser is used, then the company keep it.


The websites that say they will do the research are IFAs with websites. They will be paid the commission to do it. I would stick with a local adviser as the paperwork you get through can be quite confusing with annuities and a local adviser can certify birth certificates, marriage certificates or passport. A postal/web site would require the originals to be sent in or a certified copy (which usually costs to obtain).

Open Market Options are one of areas where using an IFA is a win-win scenario.

moonrakerz

I have just retired myself and spent some considerable time looking at the various way to invest my pension fund.

In the end I went for a conventional annuity, with level payments and I took the 25% tax free lump sum.

As Margaretclare says there are a lot more things you can do with your money, post A day.
However, you will be mature (didn't want to say "old" !) enough to remember some of the previous financial scandals - pension mis-selling, endowment mis-selling, Equitable Life. I have nasty feeling that the same bunch of sharks will be circling a new shoal of prey who now have their pension pots to "invest".
Don't forget it wasn't just the back-street boys in the previous scandals it was also some of the biggest names around. There are many billions of pounds sloshing around here.
One of the biggest draws to invest your pot of money will be to counter inflation. This is what many "advisors" will play on. I agree that this has to be considered. But there a couple of things to consider the other way - It takes 10 years (or more) for an index linked annuity to overtake a level one and as you get older your spending will almost certainly reduce. You may have to give up your car, you probably will not feel up to travelling as you once did, you will eat less and you won't want the latest mobile phone or LCD TV as soon as it hits the streets.
If you have any other income which is index linked; state pension, or perhaps a public service pension I would (and did) give long and serious thought as to where to put my pension fund in relation to index linking.
Perhaps my pension MAY not be as big as it MIGHT have been, but I now know exactly what I will get until the day I die. And if another September the 11th happens it will not affect my income.

The decision is up to the individual, everyone's needs are different. "A" day may have been a good thing - or not ! Time will tell, I don't have that time to spare.

Good luck ! and keep your hand on your wallet !

dunstonh

However, you will be mature (didn't want to say "old" !) enough to remember some of the previous financial scandals - pension Miss-selling, endowment miss-selling, Equitable Life.

What has that got to do with open market options?

I have nasty feeling that the same bunch of sharks will be circling a new shoal of prey who now have their pension pots to "invest".

Even if you were to assume that, purchasing an annuity is hardly an area where you can really miss-sell.

existing company offers x amount. Open market option has different company offering y amount. If Y beats X, then you are better off.

Don't forget it wasn't just the back-street boys in the previous scandals it was also some of the biggest names around. There are many billions of pounds sloshing around here.

Unqualified rubbish. 26 companies account for just under 60% of complaints to the FOS. 85% of companies have never had a complaint.

As those 26 companies are all tied companies and tied companies do not do open market options, its rather foolish to include them. Plus 85% of companies have no complaints so you are measuring them by a tiny minority.

One of the biggest draws to invest your pot of money will be to counter inflation. This is what many "advisers" will play on. I agree that this has to be considered. But there a couple of things to consider the other way - It takes 10 years (or more) for an index linked annuity to overtake a level one and as you get older your spending will almost certainly reduce.

Not necessarily. I have one on the go for an appointment tomorrow which will get to equal the level income during year 8. Also, just because inflation is low now, doesn't mean it will always be. You have already said you are mature enough to remember scandals of the 1980. That means you must remember the inflation at that time as well.

Whilst you raise some valid points, you go an spoil it with unqualified, inappropriate slander on the majority of financial advisers because of the actions of a few. Most of whom aren't even around today.

Next you will be saying dont have that heart bypass surgery as you saw a bad GP 5 years ago.

moonrakerz

Sorry ! duntsonh, I seem to have hit a raw nerve there !

Perhaps you should read what I actually wrote rather than what you thought I might have written !

"What has that got to do with open market options?"

Absolutely nothing, I never mentioned open market options ! They were available long before A day !

"Unqualified rubbish. 26 companies account for just under 60% of complaints to the FOS. 85% of companies have never had a complaint."

Not rubbish - the other companies account for over 40% of the complaints - not an inconsiderable number. Was Equitable Life a "one man and a dog" outfit ? 1 in 7 companies WERE complained about - not a good record.

"As those 26 companies are all tied companies and tied companies do not do open market options, its rather foolish to include them. Plus 85% of companies have no complaints so you are measuring them by a tiny minority."

I never mentioned open market option - why raise this red herring again !

"You have already said you are mature enough to remember scandals of the 1980. That means you must remember the inflation at that time as well."

I do indeed (but, again, I didn't actually mention the 1980s), I remember the 70s with inflation of over 25% too ! My point here was not to be driven into investing your funds in a risky investment by people who keeps raising the spectre of your pension being eroded away to nothing by inflation.

"you go an spoil it with unqualified, inappropriate slander"
Could I quote from the Oxford English Dictionary ? Slander: "a false & damaging utterance about a person."
If you're going to insult me, try a libel ("a published false statement")

To be serious - I was not not attacking all Financial Advisors, Insurance Cos, etc, etc, I was saying that A day may have opened more avenues for the "sharks" - which by your figures, even you concede are around.

Finally, to be frivolous again - I didn't let my GP replace my hip last year, I got an Orthopaedic Surgeon to do it.

dunstonh

Sorry ! duntsonh, I seem to have hit a raw nerve there !

Yes you did. Your attack on financial services companies transacting in this area is unfounded. Retirement options advice is something that is almost totally done by IFAs. Yet the vast majority of the issues you highlight comes from tied agents who do not transact in this area.

"What has that got to do with open market options?"

Absolutely nothing, I never mentioned open market options ! They were available long before A day !

The majority of the content of your post referred to annuity purchase. Therefore open market option is what any sensible person would investigate when purchasing the annuity.

Finally, to be frivolous again - I didn't let my GP replace my hip last year, I got an Orthopaedic Surgeon to do it.

You wouldn't let a GP do heart surgery but then you don't let a tied agent do open market options/drawdown/retirement options.

Not rubbish - the other companies account for over 40% of the complaints - not an inconsiderable number. Was Equitable Life a "one man and a dog" outfit ? 1 in 7 companies WERE complained about - not a good record.

85% of the companies have no complaints. That's an excellent record when you consider the volume of financial transactions that takes place. Complaints are a tiny minority.

I do indeed (but, again, I didn't actually mention the 1980s),

Yes you did. Pension miss-selling took place between 1988-1993. Endowments includes that period until the late 90s. If you remember those, then you must be including the 1980s. A burst of high inflation would hit anyone who has a level annuity very hard.

"you go an spoil it with unqualified, inappropriate slander"
Could I quote from the Oxford English Dictionary ? Slander: "a false & damaging utterance about a person."
If you're going to insult me, try a libel ("a published false statement")

This is a chat board not a media article.

To be serious - I was not not attacking all Financial Advisors, Insurance Cos, etc, etc, I was saying that A day may have opened more avenues for the "sharks" - which by your figures, even you concede are around.

There are always going to be bad apples around. However, you make out that its commonplace, when the stats show that it isn't. The figures quoted show its a tiny minority and the good thing about financial services, unlike other industries, is when advice is wrong, you get redress to put it right.

margaretclare

In the somewhat acrimonious exchanges above, there has been a mention of 'hitting a raw nerve'.

The OP's post 'hit a raw nerve with me', as follows:

Having done some basic reading I understand its worth while shopping around for him to get the best income. But where should I start?

Should I save my time and go straight to a finanacial advisor or is this something I can realistically research myself?

Now Dad is only 65. I am 70. I would strongly resist any son or daughter of mine (if I had a son that is!) writing about me in such terms. 'Where should I start?' 'Should I save my time......' The OP is talking about 'shopping around for him (i.e. Dad) to get the best income'. While this may be laudable in some senses, if this was me there is not a hope in hell that anyone would be doing this for me - I'd want to be finding out these things, making these kind of decisions, for myself!

It's Dad's life, Dad's future, Dad who has accrued this pension pot, and yet there is no mention that Dad has himself done any basic reading etc etc. What does Dad think about it all?

What's the problem with Dad, why has he turned over such an important area of choice and decision-making to his adult offspring? And if Dad knew he would have a pension pot to look forward to, even if he didn't know the amount, why hasn't he been looking around, asking questions and finding out things beforehand?

Margaret Clare

moonrakerz

"Your attack on financial services companies transacting in this area is unfounded. "

No it is not !! A lot of people were caused considerable financial damage by the financial shenanigans that I referred to in my OP. To say that this is not the case is burying your head in the sand.

I did not accuse all persons in the financial sector of being sharks. Least of all you. I did however accuse you of misquoting me to try and justify your over zealous defence of your line of business. You are still doing that in your response.

"methinks the man doth protest too much!"

'nuff said !

Streeet

Thank you all for your comments. It is clear that there are numerous avenues to explore. The local IFA sounds like the best starting point.

Margaretclare,
An interesting study by the 'Association of British Insurers' in Dec 2005 showed that 59% of people surveyed took their annuity with their original provider. Of these a massive 83% did not even consider an alternative.

Having read your previous post numerous times I am still unsure with whom you have an axe to grind. Upon my fathers request I am helping him to ensure he doesn't fall into the 83% that never considered an alternative. It is 'he' that will be making the final decision.. and 'I' that will help gather enough information for him to make the correct one.

I think you would be better placed to appreciate that some people, irrelevant of age, do not have the confidence when dealing with financial matters that you obviously have.