Guaranteed rate calculation

goalhanger

Hi, I just got my Pension quotation in advance of my 60th birthday .
i have a guaranteed rate pension which is 9.3% at age 60. The pot is worth £72271 and the offer is £6542 per annum single life non escalating guaranteed for 5 years? . I went on an annuity calculator and it says 9.3 % should provide maybe up to £7000 . I cant find a reason for this online and wondered if there's a good reason for this before I telephone them ?
Thanks for any help ,
Phil

goalhanger

I forgot to add - paid monthly in advance . This will work out at about £545 whereas the calculator states £592 . Is this normal ?
By the way its with the Pru and I am happy enough with the growth . Just the final calculation .
Ta,
Phil

kidmugsy

£6721 is what I get by multiplying £72271 by 0.093. Divide by 12 and I get £560.

I can see a reason for the second discrepancy: if the annual sum refers to an annual annuity paid in arrears, I can see that you'd get less from a monthly paid in advance. I've no idea why the first discrepancy exists, though. Maybe the fee that's subtracted for the IFA that you won't in fact be using? I have a vague memory of reading that that's why it's often worth using an IFA for annuity purchase - because you're paying for him anyway. (Of course, if you were shopping around, an IFA makes sense anyway - he's a more experienced shopper than you.) Anyway, the first discrepancy is about 3% so maybe that is for the fee of The Man Who Never Was.

I suspect we need info from the professionals here.

goalhanger

Thanks kidmugsy , I'm sure there are good reasons . But I don't want to lose £500 a year , or anything for that matter if I don't understand why . Stupid thing is they wrote to me loads of times saying I was getting this guaranteed rate and I used the calculators to see how much I get . I was pretty spot on with the pot but not the rate calculation . The letter only came today and says I have 30 days to decide . I am thinking it's better to take it now rather than keep paying in and only getting a little bit more in say 5 years .
Perhaps I should see an IFA ?
Thanks

kidmugsy

goalhanger wrote: »

Thanks kidmugsy , I'm sure there are good reasons . But I don't want to lose £500 a year , or anything for that matter if I don't understand why . Stupid thing is they wrote to me loads of times saying I was getting this guaranteed rate and I used the calculators to see how much I get . I was pretty spot on with the pot but not the rate calculation . The letter only came today and says I have 30 days to decide . I am thinking it's better to take it now rather than keep paying in and only getting a little bit more in say 5 years .
Perhaps I should see an IFA ?
Thanks

Patience! dunstonh or one of the other pros may be along this evening.

goalhanger

Well , I tried the Pru they couldn't tell me anything , she would phone me back . And guess what - no call .
Then today I get a letter saying my current value is £68356 which is less than the £72271 in the quote . Is the because it's before final bonus ? Which means the final bonus is peanuts . I also see they are still only paying annual bonus of 0.25% for Ex Scot Amicable customers . I feel I just want to start taking it now and use the pension as savings and plus the £45 a month I'll be saving .
Ta
Phil