Consumer Power: Have your say on annuities

Former_MSE_Wendy

The government announced in June 2010 it plans to stop the requirement to buy an annuity by the age of 75 from April 2011.

Do you agree with the proposals? Do you think everyone should cash in their pension by age 75?

Full details of this and other consultations in the Consumer Power! guide

Let us know your views...

Loughton_Monkey

Two key issues exist. Firstly, there is a principle that we should be able to do what we like with our own money. So it's really up to an individual ["Do you feel lucky punk?"] as to what strategy to adopt regarding taking the annuity. You always have the option of guaranteeing the annuity for X years.

However, the second main point is that a pension pot is built up with the help of generous tax beaks (i.e. public money). Hence, if you withdraw the age 75 bit, then I will happily use a pension as a device to save death duties [as in "I don't need a pension because I'm loaded. However, if I bung it into a pension, then when I die at 95, the pension company will pay the 'pot' into my estate, meaning that the government contribution has effectively funded the death duties. But at least my children will inherit more or less 100% of what I put in."]

Hence, the only logical answer, to me, is to say 1. Your pension pot is there. Draw it if and whenever you like at market rates. 2. If you die before taking it, then the taxpayer will claw back every penny it ever paid in (plus interest) leaving the balance to go into your estate - subject to death duties.

This strategy seems equitable to me. It leaves the individual to do what he wants, but ensures that generous pension tax relief is not wasted on something for which it was not intended.

Derek Stock

seven-day-weekend

I do not think someone should be 'forced to draw a pension. However, I also don't think they should be able to defer the pension and then be eligible for means-tested State Benefits. If they are in a position to require these, then they should draw the pension first.

shorted

Reading today's news report(Telegraph)"annuity rates tumble 2/3 in 20 years," should anyone consider waiting too long to take what is on offer?

zygurat789

shorted wrote: »

Reading today's news report(Telegraph)"annuity rates tumble 2/3 in 20 years," should anyone consider waiting too long to take what is on offer?

Yes but I read this is largely due to interest rates having fallen, since the two are closly related.
People do seem to get very upset over the fact that the pension pot vanishes once the annuity has been purchased but the income achieved from an annuity is considerably more than can be achieved anywhere else with the same security.
Yes you can have a drawdown and, if, it is managed to perfection then you die having spent your last pound but the income achieved is dependent upon returns on the stock market, not guaranteed and not encouraging over the last 10 years. With an annuity you die having spent your pot and you have enjoyed a secure, fixed income from the date of purchase.
It's the reverse of a life insurance policy and I don't hear people complaining about all the premiums they paid which were wasted because they are still alive.
The real drawback to an annuity is high inflation, an unsecured pension (drawdown) fund invested in ordinary shares should weather this storm.