10 year fixed term annuity

kidmugsy

mexicano wrote: »

Hi kidmugsy.
I don’t want to drawdown with all the fuss of reviews every year or release all the pension into cash. I’m also not sure how long I’ve got before the long sleep, even though the insurance companies estimate 89 years!!
I have a LOT of cash in isas (no wife or kids) so I figured that I should take my pension spread over 10 years which would take me to 75. By then I will probably be mentally gone anyway ����
I want to enjoy what I’ve got left and I don’t want to leave any of my pension to the insurance company.

You're obviously not bothered about longevity insurance, which is your right. But by taking an annuity at a relatively young age, and for only ten years, you will harvest very little by way of mortality credits. Moreover you'd be taking it out when interest rates are still very low. It would be a pretty irrational decision.

If you expect to be mentally gone at about 75 then that would be the obvious age at which to buy an annuity. Alternatively you might do better just to take out as much cash as you can each year while avoiding higher rate tax, and then spend it, buy Premium Bonds, or whatever.

If you have beneficiaries then you might like to consider the advantage to them of inheriting the pension tax-free if you die before 75. Then the logical thing would be for you to take the tax-free 25% lump sum, and leave the rest until you are 75. If you've died, they inherit on exceptionally good terms. If you haven't you buy an annuity. Meantime you live well off your heaps of cash in your ISAs and off your TFLS.

mexicano

"So, why are you considering an annuity?"
Doesn't a 100% value protected 10 year annuity mean that if I die let's say after 5 years the balance goes to my beneficiaries? As I understood it, a Lifetime Annuity means if I die after 5 years the payments stop and the provider keeps the rest?
I was with Friends Life who got taken over by Aviva. Aviva advised me that my policy doesn't allow drawdown or 10 year fixed guarantee, that I would have to move to another provider to get any of them.
Or I could just live on my cash until it runs out like kidmugsy suggests.
Can I take the 25% TFLS now and leave the rest invested?

Linton

mexicano wrote: »

"So, why are you considering an annuity?"
Doesn't a 100% value protected 10 year annuity mean that if I die let's say after 5 years the balance goes to my beneficiaries? As I understood it, a Lifetime Annuity means if I die after 5 years the payments stop and the provider keeps the rest?

You can have longer guarantee times with a lifetime annuity for a relatively small extra cost. The main reason for buying an annuity is to ensure you dont last longer than your money. So its a form of insurance against a longer lifespan than average. Like any insurance you lose out if the event you are insuring against doesnt happen.

I was with Friends Life who got taken over by Aviva. Aviva advised me that my policy doesn't allow drawdown or 10 year fixed guarantee, that I would have to move to another provider to get any of them.

Provided your pension doesnt include guarantees like a guaranteed annuity rate it is easy to move the money to a provider who does support drawdown.

Or I could just live on my cash until it runs out like kidmugsy suggests.

You could - what happens when the cash runs out? It would probably last longer if it was invested.

Can I take the 25% TFLS now and leave the rest invested?

Yes, if you move your pension to a provider which supports draw down. That is how draw down works . It is up to you when or if you actually take any cash from the pension.

mexicano

I'm still interested in the fixed guarantee annuity but maybe go for the 15 or 20 year ones and that way my tax bill will also be reduced.
I've done a comparison using moneyadviceservice.org.uk and they have come up with 3 providers. I will phone them and get a personal quote.

atush

Even realising that the charge will be higher than using a IFA for less money paid to you each month?

Not really getting it

mexicano

Sorry I don’t understand what you mean. I’m going to phone the insurance companies not the website that gave me the recommendations.

DairyQueen

mexicano wrote: »

Sorry I don’t understand what you mean. I’m going to phone the insurance companies not the website that gave me the recommendations.

Which is why you may be best advised to speak to an IFA before you decide to buy an annuity at all.

mexicano

I still have a few months to decide what I want to do and even then I can delay my pension for a little while longer. I’ll also make a few appointments with some local Ifas. I see that the initial meeting is usually free and I can also discuss the fees as well.
Thanks for the help and advice.