annuity rates

karol_3

After taking a lump sum from my pension I will be left with 53,000 what is the best annuity rates on offer ? I understand this is not viable for income withdrawal.

dunstonh

what is the best annuity rates on offer ?

There is no one top provider.

It depends on amount, how you want to take the benefits (i.e. monthly in advance, monthly in arrears, with or without proporation, spouse benefits, capital buy back, smoker status, health, level or increasing, amount (larger amounts get better rates with some providers), the distribution channel (different IFAs can get different rates) etc)

Your best bet is to go to an IFA as they will do the search for you. Most of the online tables use out of date rates (one provider who often comes out in the top three for non smokers has changed annuity rates three times in the last 2 weeks), use standard rates (not negotiated rates) and make assumptions on payment method and terms.

It will cost you no more going to an IFA as most providers, if you go direct, will keep the commission for themselves. A number of the better providers require you to use an IFA. It must be an IFA though. Not a tied agent or multi-tie.

EdInvestor

karol wrote: »

I understand this is not viable for income withdrawal.

Who told you that? It's not correct. SIPP providers will be happy to take funds of that size for income drawdown and so will a number of insurers. Does the pension contain any "protected rights" money from contracting out of SERPS?

You can get an idea of current annuity rates here:

https://www.fsa.gov.uk/tables

dunstonh

The FSA publications state they consider that drawdown isnt suited for those with less than 100k. Probably based on the increased risk if someone doesnt have total retirement provision of more than that amount.

They did target a number of firms a while back with high proportions of drawdown cases for people with less than 100k crystallised.

EdInvestor

This is only a problem if an advisor is involved.

It's not a problem if you do it yourself.

dunstonh

EdInvestor wrote: »

This is only a problem if an advisor is involved.

It's not a problem if you do it yourself.

Its not a problem. Advisers can do it if its less. However, the FSA in general feel that less than 100k in retirement funds is not suited for drawdown (in that it becomes a greater risk the less you have). Whether you use an adviser or not, it is worth heeding their warnings.

EdInvestor

There's no mention of any specific figure in the latest literature.

http://www.moneymadeclear.fsa.gov.uk/pdfs/income_withdrawal.pdf

dunstonh

That document is brand new and they have changed the text to:

Income withdrawal plans are complex and not suitable for
everyone, for example if you have a small pension fund
and no other assets or income to fall back on.

So, they have dropped the value but kept the warning on "small" values.

The old document is no longer available on its own link but if you check google, you will find a number of articles making reference to the old £100k comment from the FSA.

EdInvestor

The average pension fund in the UK is around 30k, so 53k after tax free cash cannot be described as "small."

dunstonh

The average would include people that started their pension last week at £20pm.

53k at retirement age is a small fund. Although being in North Suffolk/Norfolk where pension funds are at their lowest in the country, that would be a good size fund for many.

EdInvestor

Average size of pension fund used to buy an annuity last year was just under 24,000. This fund is more than double the size, it's not small.


http://www.pensionspolicyinstitute.org.uk/news.asp?p=164&s=8&a=0