Fixed term annuity

OldMusicGuy

jayjays wrote: »

Thanks red, I don't doubt I could do a little better, but to be honest I'me tired of investing and the resulting paperwork,you stated earlier you would consider my option later in life, well I feel I'm already there, income up to the 40% was my main goal and I am pretty much there...... happy days

I'll endorse this. If you are decumulating and are happy with what you are choosing to do, go for it. As long as you have evaluated the alternatives and for reasons of risk and financial planning want to take this route, great.

I currently hold a lot more cash and near cash than most people on here would advise. But like you I want to preserve significant gains I have made to enjoy spending them over the next 10 to 15 years while the remainder of my investment rides out ups and downs of the market and provides for later life.

jayjays

Thanks OMG, I realise I am very fortunate, I have more investments outside the Sipp than inside, so there's plenty to keep me active (investment wise). God willing we can come back here in 5 years to discuss the £88k leftover )
Good luck with your choices & yes, make sure you allow plenty of time to spend it
I'm off to the gym, spent far too much time lately stuck in here on my laptop, drinking coffee, eating biscuits whilst occasionally popping out for a fag !

Malthusian

As utterly crap as fixed term annuities are, this may be one of those cases where the saying "if you don't need the return, don't take the risk" comes into play.

The OP has £766,000 in his pension fund and if all the OP is concerned about is generating sufficient income to meet his needs, and the fixed term annuity alongside his other sources of income achieves that, albeit at a high cost in terms of potential lost growth, it's a valid choice. The OP hasn't given an indication that he needs investment growth for that £766,000 to provide sufficient income, adjusted for inflation, throughout his lifetime, or that inheritance is a concern.

In five years' time the OP may be a zillionaire thanks to his US racing system or he may have lost a boatload of money and the £88,404 about to mature from the fixed term annuity may be very valuable, whereas if it had been kept invested in the SIPP, who knows what would have happened.

jayjays

Cheers Malt, a very fair summary, which is exactly why I come on here, couldn't get anywhere near the knowledge base from any other source :-)

GunJack

jayjays wrote: »

I'm off to the gym, spent far too much time lately stuck in here on my laptop, drinking coffee, eating biscuits whilst occasionally popping out for a fag !

get vaping instead, far better for you..pop over to the AAE-C forum (google it)...not only is it healthier it'll save you a packet, say I sent you

coyrls

redux wrote: »

I came back and worked out the annual rate on your second withdrawal plan: 1.163% if monthly payments, so slightly better.

It comes to £5900 return on 115k in 5 years.

The cash and savings accounts could make about £2500 a year if the money stays around somewhere rather than being spent, or £2500 falling to about £2000 if depleted at the same rate as your plan. £11k or £12k compared to £6k in 5 years.

It isn't hard to set up. I help a family member with some bank accounts and their associated monthly savers. About £40,000 together, interest range 2 to 5% probable average 2.3% (we added up annual interest a couple of months ago, but I don't remember exactly)

I sat in on a meeting with her financial adviser (strictly speaking a tied sales agent), and he said some of his clients could do with talking to me about this. I thought, but didn't say, surely he could give this advice himself ...

Anyway, is a few minutes a year worth setting up a bit more of these than you perhaps already have, if it earns £1000 a year more?

The problem is, he would have to get all the money out of his SIPP and pay tax in order to implement your plan. The tax bill would vastly outweigh any gains. Tax on the fixed term annuity would only be paid as payments from the annuity are made, not on the lump sum used to purchase the annuity.

jayjays

Thanks gun, funny enough my brother in law came round only last night with his new replacement vape, lovely piece of kit, looked like a credit card but about 3-4mm deep, £35 I believe but he can get them for £20 , I tried it but 1.2 tar nearly choked me (I'm a silk cut man)............. deffo going to have a look at that forum and will give you a shout out :-)

redux

coyrls wrote: »

The problem is, he would have to get all the money out of his SIPP and pay tax in order to implement your plan. The tax bill would vastly outweigh any gains. Tax on the fixed term annuity would only be paid as payments from the annuity are made, not on the lump sum used to purchase the annuity.

Yes, somewhere in the middle of this I'd completely forgotten that, not clever, apologies. Decent cash rates within a SIPP will be harder to track down. Maybe I'll go back and delete or edit a couple of comments. Edit:done

jayjays

Thanks coy , red :- I have a fair chunk of tax paid cash maturing April-Aug, having read your comments I will be very interested to hear your views, I will post a thread in Savings and investments early April and hopefully you can help me squeeze a few extra £ out of the market )
Thanks again everyone

jayjays

So I received my first annual payment on Tuesday (already spent) , i thought I would share a couple of highlights in the 7 weeks it took to complete.....
Recap, £115000 for a 5 year Fixed term annuity delivering 5 x £6500 with a guaranteed maturity of £88404 so a total return of £120904 (I altered my original post requirement to suit my " be sure to avoid 40% tax " obsession. My first payment had to be 17/18 tax year as I had unused 20% which probably wont be available 22/23 as my state pension kicks in (all god willing I know).
2 highlights ...... It took 4 weeks to establish I was unable to transfer £115000 from my HL Sipp !!, I had £118374 and was hoping to keep the £3374 in there to play with a few shares, when the money was requested it emerged I could only transfer 77%,22% or 100%, my Pension provider wanted to challenge this, but given my time constraint I instructed a total new quote (no extra IFA cost) based on the 100%.
My revised quote was 5 x £6500 and a Guarantee of £93368, a total return of £125868, i was expecting £124446 )
2 specific question please ...
1. Why would my Sipp only allow those odd %'s of 77 and 22 , I'me sure I could have known this but didnt
2.Why was my new quote £1400 more than my expectation, i guess it had something to do with the stock market decline but dont know why it increased, I was preparing for a decrease !

As usual any info/comments gratefully received