Can I buy an Annuity with Savings?

IOMGIRL

I live on the Isle of Man. My UK house has just sold and I am wondering what is the best thing to do with the money to get me through retirement, which will start in 2-3 years time.
I believe an annuity is not an option if you have not been paying into a pension pot. Is this correct?
I do not want to buy another house, but need the money from the house sale to work for me, as I shall have no other income in retirement other than my state pension.
Any ideas?

DiggerUK

Why an annuity, spread it around a bit. You will need some ready cash, and why not some fun with Premium Bonds.
As I hope you are expecting to live more than 5 years in to retirement why not consider gold sovereigns, or Isle of Man Gold Angels.
Best of fortune to you.
..._

DaveMcG

You could buy an annuity but because interest rates are very low at the moment, you would be locking yourself into a low return, so not really a great investment.

dunstonh

I believe an annuity is not an option if you have not been paying into a pension pot. Is this correct?

Generically, it is an option. However, commercially it may not be. (i.e. yes on paper it is an option but in reality, it probably wont be due to low rates)

macrae2100

If you're under 75 you could still pay that money into a pension.

You can pay in a maximum of your yearly salary each year. And you also get tax relief on the contributions i.e. free money! If you're not currently working though you'll be maxed out at £3,600 per year.

If you're dead set on getting an annuity that's probably the best way.

IOMGIRL

Thank you all. I will probably do a mix of an annuity and investment bonds, but all thoughts and ideas appreciated. It helps to know how other manage these things.

jamesd

Best to check the pension rules on Mann and see how they look. You may be able to significantly increase the amount of money available to buy an annuity by putting it into a pension first then buying a mixture of a lifetime annuity and a term (fixed number of years, say until state pension age) annuity.

Annuities can be purchased with non-pension money. In the UK but maybe not on Mann they are treated partly as a return of capital and partly as income, so that provide some tax benefit. Unfortunately self-selection of buyers means that they tend to be bought more by those who expect to live a long time and that combined with low competition reduces the payout level. I assume that availability of these products will be even more limited in Mann than the UK as a whole.

What I suggest you do is consult a Manx independent financial adviser for advice. Or a UK one instead, if you can find one who is familiar with the relevant Manx products.

If for some reason you don't want to do that, you might consider several buy to let properties, if you can deal with the hassles of that and even though you don't want to buy another house, which I assume may be for your own home rather than to generate income.

dunstonh

IOMGIRL wrote: »

Thank you all. I will probably do a mix of an annuity and investment bonds, but all thoughts and ideas appreciated. It helps to know how other manage these things.

What reasons have led to you using the investment bond wrapper?

It could be suitable but lets look at the common suitability reasons
1 - you are a higher rate taxpayer who will be basic rate in future (ability to defer the tax calculation until you are a basic rate taxpayer)
2 - you use your CGT allowance each year and the investment bond gains do not go towards CGT.
3 - you want to place the money in trust.

Investment bonds used tohave low charge options available but that doesnt apply in the modern unbundled world. There is no longer the age allowance reduction to worry about either. So, neither of those two historic reasons are going to apply.

The investment bond has become a niche tax wrapper. Yet you have are looking to use it. Why?