Purchased Life Annuities: some basic questions

gterr

Hello folks,

I'd like to ask a few questions about PLAs, please.
My husband and I are 57 and 55 respectively, on low incomes, and with three or four very small deferred occupational pensions between us. We should both get State Retirement Pensions (eventually!). We need to boost our income. We have a property (a holiday let) which we intend to sell in a couple of years, which should yield about 100k after costs. In addition, we may get a couple of bequests when aged parents die - maybe two lots of 30k. We both have health problems and would like to retire soon, but don't have enough income.

I'm thinking that a PLA will be the way to go with the 100k from the house sale. Any idea how I should go about researching rates and actually buying one? And if we _do_ have 30k x 2 to invest later could we buy a second (and a third) PLA, or can you only have one?

Many thanks for your time.

dunstonh

Any idea how I should go about researching rates and actually buying one?

Via an IFA. Although expect the IFA to talk you out of it and look at alternative options.

CannySaver_2

dunstonh wrote: »

Via an IFA. Although expect the IFA to talk you out of it and look at alternative options.

Hi

Out of interest why would you expect the IFA to talk the OP out of it?

I can think of a few pros and cons of PLAs, e.g. guaranteed income and no risk v loss of access to capital and potential investment risk.

Just wondered about your thoughts.

The Canny Saver

CannySaver_2

Hi

I'd agree with Dunstonh that the best way to source a PLA is via an IFA.

You could find an IFA through recommendation from friends or family or use the trusted www.unbiased.co.uk

An IFA is not likely to charge you for an initial consultation, do make sure that they do a thorough job and look at all the options for you as well as PLAs. Like any financial product they have their pros and cons, although I rather like them in the right circumstance.

Something they should also look at is whether you qualify for enhanced rates which could mean you get a better income if your health status is taken into account.

Good luck!

The Canny Saver

gterr

Thank you, both, for your speedy replies.

Could I check about the issue of having more than one PLA? Can we buy a second (or third) if we receive a bequest after purchasing the first PLA?

We would definitely want a PLA that gives at least 50% of the original income when one partner dies. Is it ever better to do this by taking 2 separate single life annuities, one for each of us, or is it always better to get a joint life annuity?

Thanks for your time.

dunstonh

Out of interest why would you expect the IFA to talk the OP out of it?

Generically, the PLA can sound like the perfect option. However, commercially, the annuity rates available are usually very poor and you can get guaranteed income products paying better rates a lot of the time.

I did a case like this recently and the main requirement was an income for life. The PLA rate was lower than a guaranteed 5% net for life income investment product (100% joint) and the potential investment capital to be returned (subject to investment returns allowing)

Could I check about the issue of having more than one PLA? Can we buy a second (or third) if we receive a bequest after purchasing the first PLA?

you can.

gterr

Thanks for this. Clearly a job for an IFA then.

bigfreddiel

dunstonh wrote: »

Generically, the PLA can sound like the perfect option. However, commercially, the annuity rates available are usually very poor and you can get guaranteed income products paying better rates a lot of the time.

I did a case like this recently and the main requirement was an income for life. The PLA rate was lower than a guaranteed 5% net for life income investment product (100% joint) and the potential investment capital to be returned (subject to investment returns allowing) you can.

can you give us all some details please like what was the product, what did it pay and so on.
cheers fj

CannySaver_2

dunstonh wrote: »

I did a case like this recently and the main requirement was an income for life. The PLA rate was lower than a guaranteed 5% net for life income investment product (100% joint) and the potential investment capital to be returned (subject to investment returns allowing)

Yes, I would be interested to know what product was used here.

I'm confused as to how you get a 5% guaranteed income but with variable returns on capital. Surely if the capital peformed poorly, then over time there could be insufficient funds to pay the 5% annual income?

I'm sure I am missing something here!

The Canny Saver

dunstonh

I'm confused as to how you get a 5% guaranteed income but with variable returns on capital. Surely if the capital peformed poorly, then over time there could be insufficient funds to pay the 5% annual income?

The 5% income is insured. So, if the capital runs out, it will continue. There are a few variations of a theme with different providers.

atush

I notice you have health issues. This could mean an enhanced annuity (ie it pays a much higher rate as you aren't as likely to live as long as those who are healthy at the start). This could make a difference, but is something the IFA can look into.