Pension / Annuitie advice

bloydie

Hi,
I was hoping for some advice / assistance. I am going to read the forums this week to try and get a better idea. My parents have recently separated and my mum will be getting the pensions (3 /4 of them). My mum believes that she will need to put the pensions into an [FONT=&quot]Annuitie[/FONT]. Is this true or can she leave this with the original share company.
Also does anyone know of any good [FONT=&quot]Annuities[/FONT]. As I said previously I am all new to this, but will have to learn fast as I will need to advise advise my mum.


Thanks
R

dunstonh

My mum believes that she will need to put the pensions into an [FONT="]Annuitie[/FONT]. Is this true or can she leave this with the original share company.

She can either leave it invested and take an income (an unsecured pension income) or buy an annuity (secured pension income). She may not have all the options with the current company. They will typically only offer what they can do. Not what is possible elsewhere.

Also does anyone know of any good [FONT="]Annuities[/FONT].

Any local IFA will be able to help there. Many of the annuity providers only transact via IFAs. Some will allow direct to public but you dont gain anything as they will usually keep the money they would pay the IFA for themselves.

Loughton_Monkey

You don't make this very clear, OP.

Are we to understand that, as part of the divorce settlement, your mother is to receive agreed proportions of (what were/are) your father's pension schemes?

If so, then I am not an expert here, but my understanding is that she will effectively become the owner of some 'pension pots' in her own name, and that these will then become like any other pension.

You mention 'put the pensions into an annuity'. I'm missing the point, here, but every pension eventually gets put into an annuity. That's the nature of the beast. But you only do that when you wish to draw the pension. You do not say how old she is, or whether she wishes to retire now or later.

For all I know she may be many years off retirement, in which case she needs to keep/put the pensions in an appropriate pension plan to be invested properly until she does retire.

As has been pointed out, IFA's can usually help, but they come at a cost. We have no idea of the values you are talking about here. If very small, she probably would not wish to involve an IFA.

bloydie

Loughton_Monkey wrote: »

You don't make this very clear, OP.

Are we to understand that, as part of the divorce settlement, your mother is to receive agreed proportions of (what were/are) your father's pension schemes?

If so, then I am not an expert here, but my understanding is that she will effectively become the owner of some 'pension pots' in her own name, and that these will then become like any other pension.

You mention 'put the pensions into an annuity'. I'm missing the point, here, but every pension eventually gets put into an annuity. That's the nature of the beast. But you only do that when you wish to draw the pension. You do not say how old she is, or whether she wishes to retire now or later.

For all I know she may be many years off retirement, in which case she needs to keep/put the pensions in an appropriate pension plan to be invested properly until she does retire.

As has been pointed out, IFA's can usually help, but they come at a cost. We have no idea of the values you are talking about here. If very small, she probably would not wish to involve an IFA.

Hey

Thanks for the assistance my mum is 61 and she is wishing to take this out as soon as possible without incurring a fee / lose money. My dad was not due to take his pension until he was 65 (he is 61). She was interested in taking out 25% tax free and put the remainder into an annuitie. In total there is over 100k

jamesd

Then she should definitely discuss her options with an IFA, check unbiased.co.uk for one. An IFA will usually be able to find a higher paying annuity deal than one offered by the company that holds the money and would be paid out of commission or a fixed fee - the fixed fee might work out to be a better deal in this case, ask. Without using an IFA the annuity company would just keep the commission itself.

Loughton_Monkey

bloydie wrote: »

Hey

Thanks for the assistance my mum is 61 and she is wishing to take this out as soon as possible without incurring a fee / lose money. My dad was not due to take his pension until he was 65 (he is 61). She was interested in taking out 25% tax free and put the remainder into an annuitie. In total there is over 100k

Well in that case, you will indeed need to shop around for best annuities. An IFA may well help, and guide you through the process that would collect all the different funds into the annuity provider's coffers so that they can pay the annuity.

She may well be disappointed with the amount. Females live longer than men, and 61 is not 'old' in pension terms. Expect annuities to come in around the 5.5% mark (on the £75K after lump sum), and so around £4,125 a year for a "level" annuity, dropping down to £2,800 if she were to take an annuity that escalates by 3% a year.

bloydie

Cool thanks to both of you for the advice, im going to seek advice from the IFA on the unbiased website.

Cautious_Investor_3

Loughton_Monkey wrote: »

As has been pointed out, IFA's can usually help, but they come at a cost. We have no idea of the values you are talking about here. If very small, she probably would not wish to involve an IFA.

Hi

It is worth pointing out here that although an IFA does come at a cost with an Annuity which generally means that commission is taken by the IFA (between 1% and 3%) if an Annuity is arranged directly with a provider then commission is still taken and simply pocketed by the Annuity provider.

Therefore the use of an IFA, to ensure that the best rates are indeed sourced, seems to make sense as opposed to going direct to a provider.

Of course for large Annuity cases an individual may be better asking the IFA to work on a fee and rebate all the commission thereby increasing the level of income.

An IFA also has more bargaining power with Annuity providers, it is amazing how much they will move on the Annuity rate just to get business and the ability to negotiate like this starts at around the £50k mark.

One last thing, I'd always advocate the use of an IFA when sourcing an Annuity, but its generally a good idea to have done a bit of 'rate research' before hand, a couple of good sites to help you do this:

http://www.!!!!!!.uk/free-services/annuity-calculator/

http://www.annuities-online.com/rates/annuities.asp

It's also worth reading the Money Made Clear guides before you see an IFA, these can be found here:

http://www.moneymadeclear.org.uk/publications

I hope this helps all those looking for an Annuity!

The Cautious Investor

Cautious_Investor_3

Hi

One last thing.....I feel like Columbo!

Annuity rates are low at the moment and have fallen during the course of this year, three reasons:

1. QE1 and the possibility of QE2 pushing down yields
2. Lower interest rates
3. Solvency II

One could argue that now is not the right time to be tying into a Lifetime Annuity as the economic circumstances are unique (i.e. we have never had QE before and interest rates have rarely been this low) and Annuity rates may, and I stress may, rise in the long term future.

The OP could consider methods of producing an income now, which do not involve the commitment of a Lifetime Annuity. I am basically talking about here a Fixed Term Annuity or Income Drawdown.

Both carry additional risks and I am not saying the Lifetime Annuity rates will definitelty rise, all I am saying is that given the uniqueness of our economic situation is now the right time to lock into a rate which will be there for life?

One for debate perhaps.

The Cautious Investor