Pension Guarantee

goalhanger

Hi , I just found out that I have a guaranteed pension payout rate .
I am 58 , and at age 60 I can recieve £97 per £1000 and at 65 it will be £109 as long as I stay at the Pru for my annuity.
If i'd realised this earlier I may have increased my premium. This is equivalent to earning 10.9% on savings !
I am wondering if its still possible to top up the pot ? It seems unlikely though!
Good of them to let me know as I understand some companies are not informing people in time.
Phil

dunstonh

I am wondering if its still possible to top up the pot ? It seems unlikely though!

unlikely as most guarnateed annuity rates are attached to section 226 retirement annuity contracts which ceased to be available for new business and non-contractrual increases in 1988. There were a small number of personal pensions that continued to offer them but I would expect all to have closed them for increments.

Good of them to let me know as I understand some companies are not informing people in time.

Dont believe what you read in the media. The vast majority do contact in advance.

jamesd

9.7% is probably a good deal. What type of annuity is it, level, RPI, any spousal benefit?

Do you have any medical conditions that might significantly reduce your life expectancy? Hear trouble, diabetes, smoking? It'll be hard to beat 9.7% but if your life expectancy is reduced enough it might be possible.

mania112

goalhanger wrote: »

This is equivalent to earning 10.9% on savings !l

Doesn't really work like that, but yeah it's a better return than you'd get from buying an annuity on the open market.

goalhanger

Pretty sure I recall it being level , but the implications for tying to RPI werent too bad . I will have to take another look and maybe contact them to ask about topping up . As its only 2 years before I could take it at 60 i expect its too late even if they did it before.

magpiecottage

Although, as DunstonH says, guaranteed annuity rates were more common before 1998, there were a number of providers who continued to offer them well into the 1990s. Sun Alliance and Confederation Life (now owned by Phoenix and Sun Life of Canada respectively) spring to mind.

When sold, these guarantees were seen as a bit of a gimmick that would never come into play but falling interest rates mean they have become valuable.

The structure of the annuity is normally inflexible but this can be made up for in other ways with a bit of lateral thinking. For example, putting part of your income from the guaranteed annuity aside to supplement income later on when inflation eats into it, making separate provision for a spouse etc.

jamesd

goalhanger wrote: »

Pretty sure I recall it being level , but the implications for tying to RPI werent too bad .

Then RPI could be a particularly good deal. On the open market today RPI would roughly halve the initial income at your sort of age.

goalhanger

I have emailed them and they are writing to me to tell me if I can add voluntary contributions to the pot at this late date . And also if that added money is still classified as within the guarantee !

goalhanger

I have now heard back from the Pru and it appears that the recent Retail Distribution Review affected my ability to top-up my pot . I dont recall being warned that this might happen as I might have jumped in and added something in before the deadline. I cant see how this review affected my pension but anyway thats what they say , so thats that....

dunstonh

I dont recall being warned that this might happen as I might have jumped in and added something in before the deadline.

You will probably find that is an incorrect answer to your question. Whilst Pru, like many others, did close a lot of their legacy contracts for increments with RDR, the contract you have was actually likely closed back in 1988.

I cant see how this review affected my pension but anyway thats what they say

Commission was banned in Jan 2013 with RDR. The pension you have is a commission product. However, as said, I suspect the reason is the default you get on people trying to top up pre-RDR plans and not necessarily technically correct.

sandsy

goalhanger wrote: »

I have now heard back from the Pru and it appears that the recent Retail Distribution Review affected my ability to top-up my pot .

That's the excuse pension providers trot out when they can't be bothered to go to the time and expense of changing their systems to enable top-ups on commission-free terms.