Can existing annuity be cashed-in

Emniht

My mother in law is receiving a reduced annuity following the death of her husband 7 years ago.The original fund was just under £12k.Her husband received £470/year for 6 years until his death.Although the annuity has increased at 3%/year,she still only receives £320/year.She wants to know if it is possible to take the remainder as a lump sum .She is now 70.
Thanks

atush

I highly doubt it. Once bought, an annuity can not be wound up.

But you can ask the company, I have heard of some companies wanting to get rid of smaller annuities.

McKneff

In a word.... No...

McKneff

If the value was only 12k and it has been paying out its unlikely that there will be anything left in it anyway, best just keep on taking it. Because they have to keep paying it.

jem16

McKneff wrote: »

If the value was only 12k and it has been paying out its unlikely that there will be anything left in it anyway, best just keep on taking it. Because they have to keep paying it.

Only around £5060 has been paid out already so I wouldn't say that was hardly anything.

However it's still unlikely unless, as atush says, the annuity company would like rid of it.

dunstonh

Technically, the rules do now allow for annuities to be unwound. However, very few companies allow it unless it is due to an error. This is because of the cross subsidy that exists. If people who died early were able to unwind the annuity then the rates would reduce for all.

Pincher

She needs to live another 20 years to break even on the £12k.
If inflation shoots up, earlier. Pyrrhic victory, of course, since her other income does not go up.


I have been told that Cypriot men die from stroke and heart disease quite early, but the wives live on forever. So if the rules allow it, it would make sense to use the fund to create a single life index linked annuity using the wife as principal.


True test of love. Did she stay because of love, or just financial dependence?


Annuity providers are not that stupid, of course. The annuity rate will drop to 1%, to make sure she never gets the money back.

kidmugsy

It's conceivable that a pension reformer might remove legal obstructions to a pension company "buying out" an annuity in payment. It may be that administrative costs would be proportionately high for such a small pension, but it could also be argued that removing the costs of administering the annuity could cancel them.

Keep your eye on the budget in March: it may be the last from the Great Liberator.

dunstonh

She needs to live another 20 years to break even on the £12k.

£12000 x 25% = £3000
6 years of £470 (ignoring the indexation) = £2820. (dont know whether net or gross)
£320 for one year takes total so far to £6140.

Again, ignoring indexation (and we dont know if the £320 is net or gross), it would take 18 years. With indexation it will be less than that. If the figures mentioned are net, then the breakeven point is even earlier).

jem16

dunstonh wrote: »

£12000 x 25% = £3000
6 years of £470 (ignoring the indexation) = £2820. (dont know whether net or gross)
£320 for one year takes total so far to £6140.

MIL seems to have been receiving the £320 for 7 years so £8060 altogether so far approximately.

Again, ignoring indexation (and we dont know if the £320 is net or gross), it would take 18 years. With indexation it will be less than that. If the figures mentioned are net, then the breakeven point is even earlier).

Seems to be about 12 years if MIL has been receiving the pension for 7 years.

Pincher

dunstonh wrote: »

£12000 x 25% = £3000
6 years of £470 (ignoring the indexation) = £2820. (dont know whether net or gross)
£320 for one year takes total so far to £6140.

Again, ignoring indexation (and we dont know if the £320 is net or gross), it would take 18 years. With indexation it will be less than that. If the figures mentioned are net, then the breakeven point is even earlier).

Close enough, considering we are expecting long term low inflation, possibly even deflation.