Annuity Purchase

deirdrechristina

I retired a few years ago and haven't yet put my AVC into an annuity. There is a lot about level or escalating income but can anyone suggest which is the best one to go for. I am nearly 66 and in good health, non smoker, no medicine, my family all live to 80/90s years of age. The fund is valued at £12,240 at the moment. I just cannot understand which is the best one to go for so any advice would be appreciated. Many thanks. Dee

dunstonh

There is a lot about level or escalating income but can anyone suggest which is the best one to go for.

The one that matches your requirements.

The fund is valued at £12,240 at the moment.

So, in the scheme of things, it isnt going to make much of a difference. Your state pension is indexed. Is your occupational pension income indexed?

deirdrechristina

Thank you Dunstonh. I need as much as I can get. My TP rises with CPI. Dee

Nearly_Old

I've just gone through the process and taken a level annuity with a 10 year guarantee and 50% spouse benefit. The reason was both of us have indexed linked local authority pensions and we both qualify for the state old age pension. The total of these 4 pensions that are all indexed linked exceed our retirement budget so we went for the maximum income after allowing the add-ons of the guarantee and spouse's benefit. I did use an IFA who used the Open Market Option to get us the best deal as some providers will not deal directly with individuals.

At the end of the day it's what suits your own circumstances best.

dunstonh

Nearly Old's situation and decision was the one I was leading to. As you have other indexed income, this one may as well be as much now as you can.

Plus, spending tends to reduce as you get older.

deirdrechristina

Thank you Nearly Old and dunstonh. I was very interested in the RPI annuity but it is a risk when I may not live long enough to benefit from the yearly increase. As per your suggestion, I will probably go for the 10 year guarantee level. I have got a quote direct from many companies but Canada Life seem to be leading at the moment. I think I am suffering from 'annuity information overload' just now! Many thanks to you both again. Dee

dunstonh

I have got a quote direct from many companies but Canada Life seem to be leading at the moment.

Canada Life have recently increased their annuity rates. So, it wouldnt be a surprise to see them there. However, CL dont haggle whereas others do. So, often you can get better post haggle. Your pot size wont attract much haggling though.

sandsy

Dee, rates for females annuities may improve at the end of this year when gender equal rates are introduced. Whilst the market expects a lot of uncertainty in rates initially, the general consensus is that annuity rates will be better for females than currently although won't go as far as being an average of current male and female rates.

RPI rates are particularly poor at the moment and you would need to outlive average life expectancy to make a positive return on them, as the real rates of return used to price them are currently negative. A fixed escalation rate would be better value if you want an increasing income.

deirdrechristina

Thank you both sandsy and dunstonh. I realise my fund will not purchase very much but as my other pension is so small I have to get as much as I can. However much it is, it will make a difference to me. Thank you for your help. Dee

deirdrechristina

Me again. Just another few points if anyone can help. If I go direct to a provider for this annuity, are there any pitfalls that I should be aware of? Also, various companies tell me their fees are approx £100 or so. The fee, I was told, 'was factored into the quote'. I couldn't get a straight answer but does this mean it does come out of my fund? One annuity company quoted £104 fees plus they get £250 commission from the Ins. Co. Would this be about right? Thank you for any help you may be able to give. Dee

atush

First of all, if you go direct to your provider you dont' know if you are getting the best deal. you need to use the Open market option and ask more companies what they would pay. harder when the fund is small, but give it a go.