Pension equalisation

SeniorSam

I can remember when pension annuities were around 12%-15% and the idea of building a pension 'pot' for the future seemed to be a good idea. An essential part of working towards the day when work would be replaced by hobbies and interests with time to enjoy them to the full without financial concerns.

As the years pass by, the annuity rates reduced, but one could think that the 'pot' for the future was progressing nicely and plans were made to use all that spare time we would have to enjoy the fruits of our labour.

Work was good, enjoyable and rewarding, so 60 then 65 came and went, without thoughts that a specific date to stop work must be decided. At 70, I retired, but with other investments, I did not need to draw on my 'pot' because by deferring my state pension a few years, my needs were met by that and other capital.

Annuity rates have continued to fall and the fact that I am getting older, which should mean a larger annuity, is offset by the fact that I do not seem to be gaining by age equating to higher rates. In fact I am wondering if delaying the purchase of an annuity longer may not be to my advantage.

Now the changes to Guaranteed Minimum Pensions, due in December 2012, could add another blow to the rates I can expect from an annuity.
My pension 'pot', which was moved into a SIPP holding an Investment Bond with life funds, has moved up by 8-10% in the last year despite the poor market conditions.

However, do I continue to think that all is rosy in the garden and continuing with the investment will be the best thing to do, or take action before the equalisation takes another swipe at my future prospects?

Advise from IFA's or Brokers may be biased by the fact that a juicy commission is available and Pension offices will be reluctant to make any recommendations at a time that all clients need it most of all, despite the fact that they have been well rewarded in the past by commission and fees as the pension 'pot' has grown over the years.

Perhaps the opinion of others may help in making a timely decision? Can you help?





Sam

sandsy

The introduction of gender neutral annuity rates in December could knock the income payable from a single life male annuity by up to 10%. If you're looking to annuitise on a joint basis,the effect would be less/potentially immaterial because female rates should rise.

SeniorSam

Thank you for your reply. Could you please explain your reasoning as my understanding was the opposite and I was told this by a pensions broker.

Sam

robmatic

SeniorSam wrote: »

Advise from IFA's or Brokers may be biased by the fact that a juicy commission is available and Pension offices will be reluctant to make any recommendations at a time that all clients need it most of all, despite the fact that they have been well rewarded in the past by commission and fees as the pension 'pot' has grown over the years.

Remember that staff at a pension office will not be able to give you advice as this is a regulated activity. Commission bias is a problem generally with advisers but not so much when it comes to annuities as the rates are fairly standard (and you can avoid it altogether by seeking advice on a fee basis).

RosieBee_2

Hi,

i was reading about annuities just the other day and i stumbled onto information or an article which talked about temporary annuities which last anywhere from 5 to 10 years. if you are concerned with the income you will receive this will atleast provide you with an income and still leave enough opportunity to buy a traditional annuity if rates improve.

Depending on the size of the pension pot there are a few options such as pension transfer but this could come with charges.

I would say if your current savings vehicle is out performing the market in general in regards to the rate you are receiving it might not be a bad idea to wait, especially when rates are already at rock bottom. But this is just my two cents.

I hope this was helpful

RosieBee

SeniorSam

Thanks RosieBee,

the temporary annuities were also something I had considered along with straight annuity or drawdown. About 10 years ago I moved all my pensions into a SIPP, but as the adviser did not follow up with help on the investments, it lost money when the markets fell. He had his commission, so perhaps he thought why should he do any more.

When I switched to another provider, I did my own research and used life funds instead of shares or investment trusts and all but one fund did pretty well last year. Not to say the results will be so good in the future. The problem is, if I considered a temporary annuity, would I need to transfer the pensions again at more cost/commission ?.

I will get a few quotes and see what's what, but if the general census is that the annuity rates will rise when equalisation takes place, as 'sandsy' has picked up from somewhere and I hope will be clarified, should I leave well alone?

Lots more information needed from reliable sources please.

Sam

sandsy

SeniorSam, I think you've misunderstood me when I said it could 'knock the income... by up to 10%.' The income for a single male annuity is likely to fall by up to 10%.

SeniorSam

Thanks Sandsy. That's what I thought the position was and the reason for my thread and why I believe I need to do something about it before then.

SeniorSam

Any more wise old owls out there?