Fixed Term Annuities

Gatser

Loughton_Monkey wrote: »

OP starts with a fairly standard annuity quote. We have not established whether this is intended to be purchased from a pension fund or from free capital.

Thanks all, for the responses...

My original comparison was:
Annuity (from a pension) with a 10 year guarantee payment period (not 10 year life) VS A Fixed Term (10 yr) Annuity

Gatser

SallyG wrote: »

Nearest I've ever found to an illustration but dated 2007 - providers seem to be piling in now so has to be a good deal for them?


"Living Time, which is backed by American insurance giant and Manchester United sponsor AIG, gives the following example of the income offered to a man aged 65 from its 75 Plan compared to the top lifetime annuity provider for a price of £100,000*.
The plan would pay an income to age 75 of £7,179 and a lump sum at the end of the 10 years of £78,750. A lifetime annuity from top-of–the–table Canada Life would pay an income of £7,148. Living Time says the guaranteed lump sum would be sufficient to buy an annuity income of £6,520 a year based on current rates. The risk element to the plan is that future annuity rates may fall, leaving customers worse off than if they had bought a lifetime annuity at the outset."

Read more: http://www.thisismoney.co.uk/pensions/article.html?in_article_id=420919&in_page_id=6#ixzz1AqGa3s00

Thanks SallyG
Based on the above example this is (roughly) equivalent to the original £100k earning 5.53% over the 10 years.
Not totally unreasonable I think, considering you do know what is coming back to you after the 10 years.

As an IFA told me... Fixed Term Annuities can be considered as part of a pensions portfolio. It would be a good benchmark against a Drawdown option.