Purchased life annuity- value?

chucknorris

Does anyone have any opinion or experience of these products? I only recently stumbled upon them and was wondering how they compare to simply running down your capital from a savings account?

Do they pay a premium for giving up your capital, although in reality it is, or could be if you don't die early, paid back. Or is the premium simply the guaranteed income that you receive.

dunstonh

Does anyone have any opinion or experience of these products?

yes

I only recently stumbled upon them and was wondering how they compare to simply running down your capital from a savings account?

Generically, they fit a lot of peoples requirements but commercially, they tend to be poor value unless you need a guaranteed income for life.

Do they pay a premium for giving up your capital, although in reality it is, or could be if you don't die early, paid back.

There can be a mortality gain but it depends on the options you buy. For example, death benefits can be selected. Tax is a key benefit as some of the income would be treated as return of capital and not taxable.

chucknorris

dunstonh wrote: »

yes



Generically, they fit a lot of peoples requirements but commercially, they tend to be poor value unless you need a guaranteed income for life.



There can be a mortality gain but it depends on the options you buy. For example, death benefits can be selected. Tax is a key benefit as some of the income would be treated as return of capital and not taxable.

Thanks Dunstonh, I was hoping that you would contribute as I value your opinion. I definitely do not need a guaranteed income, but I was hoping that they may offer value. I don’t consider the tax advantage as unique because obviously if you ran down your capital from a savings account you wouldn’t pay tax on the capital element either.



I suppose I will have to use an actual quote and compare it to running a savings account down on a spreadsheet, to identify the comparable savings rate with an assumed lifespan. But from what you said it looks as if it would not compare very favourably (when savings rates return to normal levels).

xylophone

(when savings rates return to normal levels).

"When will that be?" said the Bells of Stepney.

"I'm sure I don't know," said the Great Bell of Bow.:)

danielmorris

A life annuity is a financial agreement in the form of an insurance product. According to which a seller makes a series of payments to a buyer in replace for the immediate payment of a lump sum or a series of regular payments. So purchase life annuity adds great value to life long.