Laughable annuity quotes

Proxy

Oh, and rates for major providers aren't just based on gilts. If they were, they'd be even lower.

mike004

Proxy wrote: »

...as required by EU and UK legislation to ensure these payments are sustainable. You're aiming your anger at the wrong target.

Well, something doesn't add up.

The pension companies are taking charges from pension contributions over a 40 year period.
If I have a 100k pension pot and die at 80, the pension firm will still grab a sizeable proportion of *my* pension pot.

Tom_Brine

This is something I have been thinking about with pensions for a while. I am relativley late to saving in a pension. I have a years worth from a public sector pension with a university. This is defined benefit and is hence staying where it is even though it isnt worth much per year.

I have since started a pension with my new employer. I contribute 8% of my £24,000 salary and my employer also contributes 8% (I chose 8% contribution level as it was the highest amount the employer will match). I am turning 30 this november.

However I have been thinking what is the point for the exact reason stated by the OP. There is no way in hell you would recieve the total you have in your pension pot before you popped your clogs (I probably wouldnt retire until 67-68 at teh way things are going, I wont live much longer than that, 10 years maximum?) So esentially the pension company gets the rest and all of the interest earned over the years. Surely I would be better taking the money and saving it myself (Sure it would be half the amount due to no employer contributions). I can save it tax free in ISA's and at least have the benefit of the money when I retire. I dont have to pay the banks to administer it every year. All of the money is mine. If I get ill I can spend it. I can use it as I like, I could buy a buy to let property outright for rental income as a pension.

I too am starting to see them as a rip off. If you have £150,000 in a pension. Why cant you get all the money from the company?

Linton

mike004 wrote: »

Well, something doesn't add up.

The pension companies are taking charges from pension contributions over a 40 year period.
If I have a 100k pension pot and die at 80, the pension firm will still grab a sizeable proportion of *my* pension pot.

And if you live to 100 you will be subsidised by other people's pension pots.

Anyway, in my view your numbers are wrong or there is a misunderstanding somewhere - perhaps there is a tax free lump sum provided from the £15K. Current open market inflation linked annuity rates are about £500/year for a £15K lump sum for someone aged 65.

Linton

Tom_Brine wrote: »

This is something I have been thinking about with pensions for a while. I am relativley late to saving in a pension. I have a years worth from a public sector pension with a university. This is defined benefit and is hence staying where it is even though it isnt worth much per year.

I have since started a pension with my new employer. I contribute 8% of my £24,000 salary and my employer also contributes 8% (I chose 8% contribution level as it was the highest amount the employer will match). I am turning 30 this november.

However I have been thinking what is the point for the exact reason stated by the OP. There is no way in hell you would recieve the total you have in your pension pot before you popped your clogs (I probably wouldnt retire until 67-68 at teh way things are going, I wont live much longer than that, 10 years maximum?) So esentially the pension company gets the rest and all of the interest earned over the years. Surely I would be better taking the money and saving it myself (Sure it would be half the amount due to no employer contributions). I can save it tax free in ISA's and at least have the benefit of the money when I retire. I dont have to pay the banks to administer it every year. All of the money is mine. If I get ill I can spend it. I can use it as I like, I could buy a buy to let property outright for rental income as a pension.

I too am starting to see them as a rip off. If you have £150,000 in a pension. Why cant you get all the money from the company?

Only if you have unusually bad health. The statistically predicted life expectancy for someone your age is around 90 Which means there is a 50% chance you will live longer. Something like 20% of people aged 30 now are expected to live to 100.

Suggest you recalculate your figures!

richbeth

Tom_Brine wrote: »

I too am starting to see them as a rip off. If you have £150,000 in a pension. Why cant you get all the money from the company?

Hi,
the main difference between pensions and other savings is the up front tax relief. You get this as govt want you to encourage you to generate an income during your retirement so that you will not be entirely dependant upon tax payers of the future.

In return for the tax relief you have limitations on what you can do with the funds. You can take 25% tax free when the pension is started then you have a a couple of main options e.g. you can use drawdown rather than be forced to buy an annuity. If you use drawdown any funds left in your pension pot when you die may be taxed but your benefiticary will get something. The gamble is that your investments do well enough to keep you going.

if you get an annuity there are various options on the guarantees you can get (e.g. inflation linked, keep paying some to spouse after death etc). The gamble is that you will live long enough to get all the money back.

So if you save in a pension the choice is yours but it is limited as the aim is to generate an income.

ISAs would allow you to build up your £150k and spend it when you wanted but once you spend it you're entirely reliant on state benefits. There is a sticky on ISA vs pensions which is a good read for anyone not familiar with the differences and pros/cons of each. Many people do a bit of both.

Richard

warwicktiger

1
If you have a number of pots amalgamate them, each annuity purchase will have its own separate policy fee, to cover the cost of making payments. Although small (£1.00 -£3.00 pm) they will make a difference if you have a number of small pots.

2 Have a look at this site to vary the terms of the annuity:

https://www.aviva.co.uk/annuities/quick-quote/

3 I am not suggesting Aviva will be the best, I just like their free quote system. Shop around or get a "whole of market" adviser to do it for you.

dunstonh

Annuities seem to be daylight robbery.

Only if you dont understand.

What is the point of saving for your retirement if you are going to be ripped off on retirement day?

Who is ripping you off?

Pension funds are yet another rip off in Rip Off Britain.

What have pension funds got to do with it? First it was annuities. Now its pension funds. Any other things you want to bring into this thread?

You have already been told the annuity rate quoted seems low. Typically you would expect something closer to 5-6% subject to health. So, perhaps you are including every option going which is hitting the annuity rate hard. The figure is more in line with a joint life, RPI increasing one.

Stop the ranting about rip off and try and learn and understand instead. You will get further if you do that.

mike004

warwicktiger wrote: »

1
If you have a number of pots amalgamate them, each annuity purchase will have its own separate policy fee, to cover the cost of making payments. Although small (£1.00 -£3.00 pm) they will make a difference if you have a number of small pots.

Is this feasible, given that I may have to pay exit fees, then maybe entry fees?

If my pot is below 18k, trivial commutation means I can take it as a lump sum. However, I am still taxed on 75% of the lump sum..

mike004

dunstonh wrote: »

Who is ripping you off?
What have pension funds got to do with it? First it was annuities. Now its pension funds. Any other things you want to bring into this thread?

Well, IFAs spring to mind...

Don't you see my point that annuity providers are walking off with a very large chunk of people's hard earned pension pots?