Annuity rates

Froglet

I know this is probably like asking how long is a piece of string ! But I am looking at converting a smallish pension into an annuity in July when I will be 63.Considered it last year and decided to wait but annuities seem to be getting worse not better.

So would it be sensible to wait again or take it before it gets any worse ?.I already have a small annuity income,and another larger pension which I pay into ,even though I earn less than 3k each year with a part time job.

What are people's considered opinions please? Thanks.

dunstonh

Considered it last year and decided to wait but annuities seem to be getting worse not better.

The cross subsidy through mortality gain is reduced to less people buying them. Interest rates have the obvious impact too (not just current but through long term gilt pricing etc).

So would it be sensible to wait again or take it before it gets any worse ?.

Crystal ball. One thing we do know is that annuities sales have levelled and are now back on par with drawdown. So, that should give providers a better basis for quotes over the next year or two. And as soon as market uncertainty has gone (when is unknown) and interest rates rise then annuity rates should increase.

However, your question is largely a crystal ball job.

kidmugsy

Some people argue that the best value available is the annuity you get by deferring your state pension.

Froglet

kidmugsy wrote: »

Some people argue that the best value available is the annuity you get by deferring your state pension.

Yes,hubby on the old state pension is already doing that.Mine is due next summer and the forecast I got last year only equates to £70 per week as a lot of my working life has only been part time.So I won't benefit a lot by deferring,but that is something I can decide later.

What I am concerned at is the small pension going down in value alongside the annuity rate.We are only talking about 13k though,my larger pension is about 30k.So in the scheme of things not a great deal but just wondered what people thought.

Froglet

dunstonh wrote: »

The cross subsidy through mortality gain is reduced to less people buying them. Interest rates have the obvious impact too (not just current but through long term gilt pricing etc).



Crystal ball. One thing we do know is that annuities sales have levelled and are now back on par with drawdown. So, that should give providers a better basis for quotes over the next year or two. And as soon as market uncertainty has gone (when is unknown) and interest rates rise then annuity rates should increase.

However, your question is largely a crystal ball job.

Thanks,I appreciate your thoughts and even someone experienced like yourself must wish they knew the answer! I suppose it may be clearer after the eu in or out decision in June.

AnotherJoe

I wouldn't get an annuity at age 63 unless I was in ill health. I think you'll get a lousy rate.

For £13k you could spread it over a few high interest rate savings accounts, get 5% or so overall, retain the lump sum, and it would effectively be a dual life annuity with no diminution for the second person.

What rates have you been quoted?

Triumph13

Have you looked into buying more year's NI contributions? If you didn't pay NICs in recent years you could boost that £70 quite significantly and that would probably be very good value indeed.

kidmugsy

Triumph13 is on to good one. Another thing to consider is doing pension drawdown so that your annual income is always below the personal allowance. That way you get it all out tax-free.

Meantime you keep topping up the pension with £2880 net p.a. (£3600 gross) so that you can carry on the procedure until you are 75. This stunt makes you a profit of £720 p.a. which I'll bet looks pretty decent compared to annuity rates.

atush

If I was gpoing to buy an annuity, I'd b looking to do so after age 65, not before.

If you are looking to buy soon, have you moved your pension to cash?

Froglet

AnotherJoe wrote: »

I wouldn't get an annuity at age 63 unless I was in ill health. I think you'll get a lousy rate.

For £13k you could spread it over a few high interest rate savings accounts, get 5% or so overall, retain the lump sum, and it would effectively be a dual life annuity with no diminution for the second person.

What rates have you been quoted?

Yes I could take it out as a lump sum,but until I give up work,i will then pay tax on some of it.


I am awaiting a statement from Aviva as to the various options I have, so I don't as yet know the rates.I filled in a health questionnaire last year when I enquired,i may be on quite a selection of pills! but none that would give me an enhanced annuity,apparently.

Froglet

Triumph13 wrote: »

Have you looked into buying more year's NI contributions? If you didn't pay NICs in recent years you could boost that £70 quite significantly and that would probably be very good value indeed.

Thanks.To be honest,i know you can do that but as I only have 16 years and you need 35,it would cost so much I am not sure if it is worth it.Maybe a few years might be.Something I will look into though.