Prudential AVC - 'Open Market Option'??

cashupfront

I'm looking to take an annuity from my AVC and the Pru have given me some quotations for annuity options. They have, however, indicated that I have the choice to take my fund to another provider - who may or may not offer a better deal.

I have a fund of £24,000 and the Pru are offering a lump sum of £6000 + a yearly income of £830 or alternatively, an annual income of £1117 and no lump sum. Other quotes have been provided linked to the market performance of their 'with profits fund'.

I am very averse to risk so would probably opt for the fixed income with or without the lump sum.

I am wondering though, if there would be much to gain from getting quotes from other providers. Are they likely to be hugely different from the Pru?

I'm afraid my grasp of the annuity market is very poor so I might well wander into difficulties without an IFA - yet I have great misgivings about engaging one because I suspect that any slight enhancement in the annuity would just be outweighed by the fee anyway - plus the fact that the Prudential AVC was originally recommended by my union so I'm guessing they offer a competitive product ( is that a bit naive?)

Can anyone advise -

a)If I am wise dismissing the 'with profits' options.
b)If I should bother looking at other providers.
c) Any recommendations if I do?

dunstonh

I am wondering though, if there would be much to gain from getting quotes from other providers. Are they likely to be hugely different from the Pru?

Pru standard terms rarely come top. Open market option should beat it.

yet I have great misgivings about engaging one because I suspect that any slight enhancement in the annuity would just be outweighed by the fee anyway

So you would rather pay Pru 1.3% of the value for offering you less?

plus the fact that the Prudential AVC was originally recommended by my union so I'm guessing they offer a competitive product ( is that a bit naive?)

Very naive. Some of the worst products I have ever seen have come from Unions. In this case it is not the case but dont mix up the pension with the annuity. It is effectively two products. One to get you to retirement. One to pay an income in retirement.

a)If I am wise dismissing the 'with profits' options.

Its an advice thing so cant give advice. However, I wouldnt want it.

b)If I should bother looking at other providers.

Do you want more? if yes, then yes you should. If no, then no you shouldnt.

c) Any recommendations if I do?

see a local IFA.

xylophone

http://www.sharingpensions.co.uk/pension_annuity2.htm

Worth a read?

jamesd

With profits tends to have a bad reputation. That's deserved. Best to avoid.

Use the open market option via an IFA from unbiased.co.uk. Commission will be paid by the pension annuity provider and you'll almost certainly end up with a higher income at no out of pocket cost to you.

Now isn't a great time to be buying an annuity. If you can wait a few years before buying you might consider using income drawdown and taking an income from investments instead.

CannySaver_2

Hi

A few thoughts for you:

1. Always use an IFA to arrange your Annuity, if you go direct you will still be paying commission it will just be a windfall for the provider you go direct to if you don't take advice

2. An IFA should be able to get better rates than the Pru as they will have access to providers who you have probably never even heard of, e.g. when did you last think of calling Hodge or Just Retirement etc

3. An IFA will also be able to talk you through which options on an Annuity are best for your circumstances e.g. spouses pension, guaranteed rates etc

4. Do research yourself beforehand though to educate yourself, use a pension annuity calculator to do a few quotes yourself

5. If you want a guaranteed income for life then an annuity is the only option for you. However, rates are poor at the moment, although in my opinion, will only get worse over the next few years. You could look at a fixed term annuity, which gives you a guaranteed income for a period of time and then a guaranteed maturity amount which you can then use to buy another fixed term annuity or indeed a normal annuity. This can be useful for people who do not want to lock into a lifetime annuity now, because they think annuity rates may rise in the future or that they might qualify for an enhanced annuity in the future

6. Always check whether you qualify for an enhanced annuity due to health or lifestyle issues. Only an IFA can really check this out for yuo properly. Even if you think you are healthy or manage easily with a health issue, an annuity provider might think it enough to give you a better rate

7. I quite like the Prudential With Profit's Annuity, their track record is good and I have a couple of friends with them, and they are happy. Each to their own though, it does carry investment risk, and you definitely should take advice if you consider this area

8. I don't think Income Drawdown is right for you, your fund is small, it can be costly, and you are risk averse. As your fund remains invested with an Income Drawdown plan this is unlikely to be right for you, but again, take advice

9. Just because your Union recommended something doesn't make it the best deal on the market, shop around by using an IFA, www.unbiased.co.uk

I hope this helps.

The Canny Saver