Multiple pensions and annuities

stinktankcynic

If you have multiple pensions, AVC, stakeholder and nest etc, come retirement, how would you convert them to an annuity? Approach an annuity firm and then then get them all transferred to that firm? Do They combine the cash together? Is there a fee for this on top of the rate % they pay you?

If pensioners have small pots, but above trivial communtation and cannot get an annuity, what happens? Or will one or two firms take on small pots but give really low rates in return?

For a fit 65 years old, what's the typical payout on a £25000 pot?

dunstonh

how would you convert them to an annuity?

Typically by getting your IFA to use the immediate vesting personal pension transfer method under an open market option style arrangement (many annuity providers cannot do the open market option method with multiple schemes).

pproach an annuity firm and then then get them all transferred to that firm?

No. Approach an IFA.

Is there a fee for this on top of the rate % they pay you?

The fee you agree with the IFA is factored into the pension fund and reflects the rate you get.

f pensioners have small pots, but above trivial communtation and cannot get an annuity, what happens?

They can get an annuity. (an IFA will still be ok for just £25k - although make sure the fee is around the £750-£1000 mark - no more)

brasso

stinktankcynic wrote: »

If you have multiple pensions, AVC, stakeholder and nest etc, come retirement, how would you convert them to an annuity? Approach an annuity firm and then then get them all transferred to that firm? Do They combine the cash together? Is there a fee for this on top of the rate % they pay you?

If pensioners have small pots, but above trivial communtation and cannot get an annuity, what happens? Or will one or two firms take on small pots but give really low rates in return?

For a fit 65 years old, what's the typical payout on a £25000 pot?

Here's what I did --

-- Opened a SIPP (self invested personal pension) with Hargreaves Lansdown. There are plenty of other providers around but HL are perhaps the highest profile.

-- Transferred everything into the SIPP. I had 4 or 5 small pots from different employers. I also contracted out of SERPS and seem to recall I was able to transfer the value into the SIPP.

-- From that point on, I've been able to make my own decisions about what to invest in. It seemed intimidating at first but I soon got the hang of it.

-- As I approach retirement, in about 10 years, I will check out what annuity I can buy with whatever is in the pot. If it doesn't seem like a good time to buy an annuity, I can live for quite a while on my ISA proceeds and state pension etc.

-- Personally, I would go nowhere near an IFA. 25K is not a huge pension pot. Why give up 4% of it for no very good reason?

-- At current rates, depending on what your needs are e.g. index-linked, spouse entitlements etc, you might get somewhere round £800-£1000 a year as a very rough approximation.

-- If you are still earning, remember that any additional cash sums you put in a SIPP or other pension, will be automatically supplemented by 20-40% by the Exchequer, depending on your tax rate.

The general message is, if possible, don't go near financial services companies. They are business who make their money by charging you fees for information that is widely available. They also tend to be rather conservative in their recommendations.

GhIFA

brasso wrote: »

Here's what I did --

-- Opened a SIPP (self invested personal pension) with Hargreaves Lansdown. There are plenty of other providers around but HL are perhaps the highest profile.

-- Transferred everything into the SIPP. I had 4 or 5 small pots from different employers. I also contracted out of SERPS and seem to recall I was able to transfer the value into the SIPP.

-- From that point on, I've been able to make my own decisions about what to invest in. It seemed intimidating at first but I soon got the hang of it.

-- As I approach retirement, in about 10 years, I will check out what annuity I can buy with whatever is in the pot. If it doesn't seem like a good time to buy an annuity, I can live for quite a while on my ISA proceeds and state pension etc.

-- Personally, I would go nowhere near an IFA. 25K is not a huge pension pot. Why give up 4% of it for no very good reason?

-- At current rates, depending on what your needs are e.g. index-linked, spouse entitlements etc, you might get somewhere round £800-£1000 a year as a very rough approximation.

-- If you are still earning, remember that any additional cash sums you put in a SIPP or other pension, will be automatically supplemented by 20-40% by the Exchequer, depending on your tax rate.

The general message is, if possible, don't go near financial services companies. They are business who make their money by charging you fees for information that is widely available. They also tend to be rather conservative in their recommendations.

Because, as has been mentioned on here many times, an IFA will tend to get an increase on the standard rate on offer.

brasso

GhIFA wrote: »

Because, as has been mentioned on here many times, an IFA will tend to get an increase on the standard rate on offer.

What do you mean by the standard rate? There are many different annuities on offer. Are you saying that an IFA will get the client an extra x% on all annuities? And will the x% increase be greater than the total fees charged to the client...?

jem16

brasso wrote: »

What do you mean by the standard rate? There are many different annuities on offer. Are you saying that an IFA will get the client an extra x% on all annuities? And will the x% increase be greater than the total fees charged to the client...?

The standard rate will vary from provider to provider. All will include a charge for setting up the annuity even going direct to the company but you just don't see the charge as it's reflected in the annuity rate.

An IFA will allow you to pay a fee directly and this will be reflected in the higher annuity rate. The fee can be taken via the product and again this will be reflected in the annuity rate.

As IFAs have access to the whole market, you will find that they usually have access to the best rates and are often able to haggle for better rates, particularly with enhanced annuities.

The general message is, if possible, don't go near financial services companies. They are business who make their money by charging you fees for information that is widely available. They also tend to be rather conservative in their recommendations.

The one area where it's a no brainer to use an IFA is for annuity purchases as they are usually the ones who will get the best rates.

dunstonh

IFAs frequently beat the DIY annuity rates after fees. DIY ones have built in commission. The IFA ones have no commission factored in but the agreed fee can be factored in. If the commission was say £500 and the fee £500 than the way they are dealt with is identical. IFAs though have the ability to haggle the price up.

atush

If you choose to buy an annuity (over using drawdown) then you are best going with an IFA. As all annuities have a fee component, which you don't get back if you DIY.

An annuity is the one time all investors of whatever type, are best using an IFA.

As far as a 25K pot for a healthy 65 yr old, that 65 yr old probably can't afford to retire. Unless they have a lot of other savings and investments. If all those savings and investments are in ISAs, that person isn't using their full personal allowance even once you include state pension. So probably should have put more into pensions over ISAs.

GhIFA

brasso wrote: »

What do you mean by the standard rate? There are many different annuities on offer. Are you saying that an IFA will get the client an extra x% on all annuities? And will the x% increase be greater than the total fees charged to the client...?

The standard open market rate for whichever basis they are looking to take their annuity on. Generally speaking, and IFA will be able to secure a higher rate than DIY, and over time yes, the fee will more than pay for itself in the additional income secured.