Fixed Term Annuity

Hagarep

I am a 60 year old male intending to retire in approximately 6 years time when my state pension is due. I have 4 pension policies of which one is section 32 with a guaranteed minimum annuity maturing in 5 years time which I will leave untouched until then. The remaining 3 policies combined have a value of £77k.
I am looking to combine these 3 policies into a 6 year fixed term annuity releasing the 25% tax free at the same time to enable me to add to my BTL portfolio. I do not require an income from the annuity and am looking for a fixed lump sum on maturity.
I have attempted to obtain fixed term annuity quotations from providers but they are telling me that they will only deal with and provide quotations to financial advisors. I have discussed this with both the providers and advisors and I am informed there is a fixed fee of 3% (approx £1732) taken from the sum invested.
I object to this as I do not require advice and am only requesting quotations so I can choose myself which annuity to purchase.
Has anybody else had this problem or is able to suggest the best way forward to obtain my goal ?
Thanks in advance

greenglide

I do not require an income from the annuity and am looking for a fixed lump sum on maturity

Confused!

If you don't want any income from an annuity why do you want an annuity? It is, after all, a device for converting a lump sum into an income stream.

Is what you really want not to take a tax free lump sum from the pension and put it into drawdown without actually taking withdrawals while the sum continues to gow (hopefully)?

Hagarep

Thanks for your response greenglide....I am new to all this so any guidance would be greatly appreciated. At this stage I am attempting to release the tax free lump sum the quickest and simplest way without incurring excessive costs. I was informed there was a "fixed term annuity" available that did not provide an income stream but guaranteed a lump sum on maturity. This seemed to be the best way forward as I do not want to take any risks at this stage and I will know the pension pot I will have to play with when I come to retire. I have attempted to discuss this with providers but all they seem to want to do is refer me to financial advisors.

greenglide

It sounds as if you either need to learn about how pensions actually work or you do need to consult and IFA.

To do what you want you would contact your pension provider and ask if you can put your pension into drawdown and take the tax free lump sum but you dont want the receive any regular payments yet.

You can the option of consolidating all the pensions but you need to check whether there any valuable guarantees that would be lost though.

You could consolidate the with a provider who would support drawdown, especially after April when the new rules come it.

bmm78

Hagarep wrote: »

I am looking to combine these 3 policies into a 6 year fixed term annuity releasing the 25% tax free at the same time to enable me to add to my BTL portfolio. I do not require an income from the annuity and am looking for a fixed lump sum on maturity.

I have attempted to obtain fixed term annuity quotations from providers but they are telling me that they will only deal with and provide quotations to financial advisors. I have discussed this with both the providers and advisors and I am informed there is a fixed fee of 3% (approx £1732) taken from the sum invested.

Despite the name, Fixed Term Annuities are written under drawdown rules, and as such some providers consider them to be high risk and refuse to sell them unless advice has been taken. It is safer for them if an adviser is involved, as the adviser would take it on the chin if FOS concluded the product wasn't suitable, and it also helps ensure that the process of transferring funds and setting up the new plan is carried out efficiently.

It's their commercial prerogative as to whether they insist on an adviser sign off for a particular product - essentially a decision as to whether increased sales justifies the additional risk.

Something to bear in mind is that even when not taking advice, a commission may be payable on the product, which will often be a similar amount to the advice fee. Always check the product illustration for details of this.

An alternative is to set up drawdown yourself, and either choose your own investments, or place it in cash if you are completely risk averse (while accepting that the fund will probably lose value in real terms).

Hagarep

Thankyou both for your straight forward explanation.....I will do some more research into setting up a drawdown.
I am afraid I have little faith in IFA....I recently instructed one to look at and schedule my pension portfolio. I asked for a quotation to do this but he said it was not possible to provide a fixed quote and gave me an estimate. His fee invoice was 50% more than his estimate. When I queried this I was unable to get a satisfactory explanation I could understand.

dunstonh

I am afraid I have little faith in IFA....I recently instructed one to look at and schedule my pension portfolio. I asked for a quotation to do this but he said it was not possible to provide a fixed quote and gave me an estimate. His fee invoice was 50% more than his estimate. When I queried this I was unable to get a satisfactory explanation I could understand.

You are not quite mainstream and that can affect things. You are looking to carry out a high risk transaction and that can distort things compared to conventional pension products. The risk is greater with yours considering the guarantees being given up (and the potential reduction to state pension indexation as well). The greater the risk, the greater the cost. Especially if the transaction isnt looking like a good idea for you. What you want to do would be classed as an occupational pension transfer.

I have attempted to obtain fixed term annuity quotations from providers but they are telling me that they will only deal with and provide quotations to financial advisors.

There are two reasons for this. One is retail and the other is liability. Product manufacturers tend to sell via retailers. In this case, the adviser the is the retailer. Providers that retail direct to public have to increase their costs and regulatory requirements. If they sell enough that way, it can be worth it. If not, they will just retail via intermediaries. The other reason is liability for the sale. Especially in higher risk transactions. A lot of providers do not wish to take on that open ended liability. Especially when it comes to pensions that fall under occupational pension transfer guidelines.

I have discussed this with both the providers and advisors and I am informed there is a fixed fee of 3% (approx £1732) taken from the sum invested.

That is the typical commission rate you see on non-advised. Although you tend to see less on advised. Although the monetary amount, is likely to be in the same ballpark. Ironically, advised may well result in the best terms when it comes ot annuities.

I object to this as I do not require advice

What you have typed indicates you dont know what you are doing and you almost certainly do not know the consequences of the loss of GMP. So, perhaps you do need that advice?

xylophone

The risk is greater with yours considering the guarantees being given up (and the potential reduction to state pension indexation as well).

The OP is proposing to leave his S32 alone.

I have 4 pension policies of which one is section 32 with a guaranteed minimum annuity maturing in 5 years time which I will leave untouched until then. The remaining 3 policies combined have a value of £77k.

The S32 may well have GMP but he will reach GMP age (65) and state pension age in the new state pension scheme.

There will be no GMP related indexation in the new state pension - if he has any post 88 GMP, the insurer will be obliged to index link it by up to 3% CPI.