Should I wait till April?

Hoz

Hi all,
I'm new to this forum, I'm in need of advice, I'm 65 in January and have been looking for advice regarding Annuities, I have been offered help from annuityline.co.uk but they seem to be pushing me to take an annuity as soon as possible, I assume this is because they get a commission from whichever company they introduce me to. I'm confused and don't know whether to wait three months and seek advice after April when these new rules come in. Any advice would be gratefully received.
Thank you
John

kidmugsy

Hoz wrote: »

Hi all,
I'm new to this forum, I'm in need of advice, I'm 65 in January and have been looking for advice regarding Annuities

I take it you have some sort of money-purchase pension, either an employer's scheme or a personal pension. The first thing to note is that there is no compulsion to buy an annuity, and indeed there hasn't been for years. You can instead enter Income Drawdown (aka Income Withdrawal). If your current pension provider doesn't offer it, you can swap to one who does (having first checked that you wouldn't be giving up any valuable features, and that you wouldn't be paying outrageous charges).

Then you can either enter Drawdown in this tax year, or wait for the greater flexibility on offer next tax year. Alternatively, if you think that an annuity would suit you, you can plan to take 25% of your fund tax-free, and use the rest to buy an annuity. If your fund is big enough it might be worth going to an IFA who will try to get you an annuity that is particularly good value. (Don't use any old financial adviser, for instance at a bank.)

I also have a suggestion: if you are in good health and therefore have a reasonable hope of a long life, consider deferring your State Retirement Pension for two or three years, and compensating by drawing a bit more from your money-purchase pension than you otherwise would have. The reward you get for deferring an SRP is handsome: an extra 10.4% on your State Pension for every year you have deferred it. Since that reward (known as "extra pension" or "increments") is index-linked to protect you from inflation, that's an attractive return on the capital you have invested by forgoing the pension. Read all about it:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/299286/dwp024-apr-14.pdf

bmm78

Without more details on your situation it's difficult to offer an opinion on whether you should buy an annuity.

What I would say is that you should not commit to an annuity purchase if you are in any way unsure that it is the right thing for you. Annuities are not "bad" products, but they are (normally) irreversible and once bought can't be changed or undone. It's a major decision that should be made when the time is right for you, and you shouldn't feel pressured into doing something.

What often slips under the radar is that there is more than just annuities and drawdown (and whatever comes into play next April). For example, fixed term annuities are a form of drawdown that carry no investment risk, but on the flipside they sacrifice some growth potential and flexibility over income.

Advice is optimal if you can afford it, and most advisers will allow you to deduct their charge from the pot in the same way as commission. IFAs will typically be willing to have an initial chat without cost or obligation, which can help put you on the right track even if you don't go ahead with them.

Personally I'm not expecting any great innovations on the market in April, and there is more than enough flexibility in the current system for most people. However, I would suggest delaying to get a bit of breathing space and get more clued up on your options.

xylophone

http://citywire.co.uk/money/how-deferring-state-pension-boosts-your-income/a769139

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301563/Pensions_fact_sheet_v8.pdf

If you are all at sea you could consider consulting an IFA https://www.unbiased.co.uk/

dunstonh

I have been offered help from annuityline.co.uk but they seem to be pushing me to take an annuity as soon as possible

This is the problem when using a limited service that promotes one option. Why are you not using an IFA?

I assume this is because they get a commission from whichever company they introduce me to.

Commission is still allowed on non-advised options. it is not on advised options. If your pension pot is over £30k ish, then cost of advice would likely be cheaper than the cost of commission.

I'm confused and don't know whether to wait three months and seek advice after April when these new rules come in.

Or seek advice now so you are prepared and dont have any bias.