Help with annuities please

OldMusicGuy

MoneysavingRookie wrote: »

Sorry for babbling on, but would I be safe to buy a joint annuity without either the protection of a guaranteed period or value protection?

Safe from what? All annuities are "safe".

If you buy a 100% joint annuity, there would be no need for a guarantee period. But if you bought a single life annuity or a 50% annuity (50% paid to your wife if you die), then the guarantee period would ensure your wife got full payout for the guarantee period if you die early.

I'm not sure what you mean by "value protection" but if you mean escalation so that the annuity increases every year, that helps offset the effects of inflation, but it reduces the amount of money you get paid at the start of the annuity.

I can only urge you to work through some examples on the website I linked to. It explains all of this in step by step format and you can see the impact of the choices you make on the actual amount of the annuity (for example, the more "value protection" you have, the lower the initial payments will be).

Like xylophone says, if you can't understand the website, get an appointment with Pensionwise and they will explain all of this in person, for free.

dunstonh

Buying annuities via an IFA is the most common method (and IFA arranged annuity rates are typically higher than DIY/internet based sites). So, on the assumption you are using an IFA, what are they saying when you ask them these things?

AnotherJoe

MoneysavingRookie wrote: »

Thanks for all of the responses.
Just to try and clarify my position, I have just turned the age of 55 and I want to buy a joint annuity and take the tax free cash as I have a few debts I want to clear. I also want to cover my wife so that she would get my pension payments going forward. The issue I have is the understanding of the requirements for a Guaranteed period or Value protection as I thought I could just purchase a joint annuity and I and my wife would be covered for life.


Any advice greatly appreciated..

Buying an annuity aged 55, unless you have limited life expectancy or are the worlds most cautious person, is likely to be a terrible deal.

MoneysavingRookie

AnotherJoe wrote: »

Buying an annuity aged 55, unless you have limited life expectancy or are the worlds most cautious person, is likely to be a terrible deal.

Hi AnotherJoe,


My main concern is the situation with my debts, which I want to clear using the 25% tax free cash. I also wanted to ensure I had regular income to help with bills etc each month.


I have looked on all of the websites mentioned in this thread and also had an appointment with Pensionwise, however I was still unsure what my best options were/are for the remainder of my pension pot.


I must admit that I am not the worlds best when it comes to finances so I do appreciate all imput from you guy's here.

MoneysavingRookie

dunstonh wrote: »

Buying annuities via an IFA is the most common method (and IFA arranged annuity rates are typically higher than DIY/internet based sites). So, on the assumption you are using an IFA, what are they saying when you ask them these things?

Hi Dunstonh.


I know it's not probably the best option but I was hoping to not use an IFA in this process.


Thanks for any advice given though.

MoneysavingRookie

OldMusicGuy wrote: »

Safe from what? All annuities are "safe".

If you buy a 100% joint annuity, there would be no need for a guarantee period. But if you bought a single life annuity or a 50% annuity (50% paid to your wife if you die), then the guarantee period would ensure your wife got full payout for the guarantee period if you die early.

I'm not sure what you mean by "value protection" but if you mean escalation so that the annuity increases every year, that helps offset the effects of inflation, but it reduces the amount of money you get paid at the start of the annuity.

I can only urge you to work through some examples on the website I linked to. It explains all of this in step by step format and you can see the impact of the choices you make on the actual amount of the annuity (for example, the more "value protection" you have, the lower the initial payments will be).

Like xylophone says, if you can't understand the website, get an appointment with Pensionwise and they will explain all of this in person, for free.

Hi OldMusicGuy,


Many thanks for all of your responses, I have used both websites amongst others and was given some good advice via Pensionwise too.
I thought my best option was to purchase a joint annuity with no protection at a level rate.


I was a little unsure how the guaranteed period worked and then saw that it was not advise-able to use with a joint life annuity.


Appreciate greatly all of you guy's on here who have replied.

MoneysavingRookie

Malthusian wrote: »

It's only not safe if you are very concerned about the risk that both you and your spouse die relatively early, and want your heirs to receive a minimum payment if that happens. But if you were particularly concerned about the amount your heirs will get, you probably wouldn't be buying an annuity in the first place.

Income from an annuity would typically be spent, so your heirs on second death won't be expecting to get anything from the annuity regardless of when death occurs. If you are expecting the income from the annuity to accumulate in your estate and eventually be inherited on the second death, it makes little sense to buy an annuity.

Hi Malthusian,


Many thanks for the response, I would like to say that I have no major health worries, we are not in tip top condition but hope to live for a good while yet.

MoneysavingRookie

Hi xylophone,


Thanks, I have had an appointment with pension-wise and it was helpful to an extent.


Cheers.

dunstonh

I know it's not probably the best option but I was hoping to not use an IFA in this process.

In which case, you are likely to end up paying higher charges and get a lower annuity rate.

DIY arranged annuities allow commission still and the typical commission rate used by the annuity websites is higher than the fee an IFA would charge. Commission or fee is paid out of the fund and affects the effective annuity rate.

There are also the good points raised by others on how a lifetime annuity/IVPPP is going to be really poor value at 55 and maybe short term solutions with a view to buying a lifetime annuity/IVPPP later would be better.

MoneysavingRookie

AnotherJoe wrote: »

Buying an annuity aged 55, unless you have limited life expectancy or are the worlds most cautious person, is likely to be a terrible deal.

dunstonh wrote: »

In which case, you are likely to end up paying higher charges and get a lower annuity rate.

DIY arranged annuities allow commission still and the typical commission rate used by the annuity websites is higher than the fee an IFA would charge. Commission or fee is paid out of the fund and affects the effective annuity rate.

There are also the good points raised by others on how a lifetime annuity/IVPPP is going to be really poor value at 55 and maybe short term solutions with a view to buying a lifetime annuity/IVPPP later would be better.

Thanks again Dunstonh,


Would drawdown be a better option in my case?