With Profit Annuities

garmeg

I was thinking of crystallising the funds I have in excess of LTA and using these proceeds to buy a with profits annuity. Amount is circa £150k after £50k LTA charge.

I am struggling to find a list of providers for this somewhat niche product - I can only seem to find Prudential as a provider.

Are there any others?

How easy is it to get quotes for these?

Linton

It may be worthwhile going to an IFA who should have access to annuities which are not sold directly to the public.  They may be able to get a better deal than you could which would pay for the charges.

dunstonh

I was thinking of crystallising the funds I have in excess of LTA and using these proceeds to buy a with profits annuity

Why?
I will put my hands up straight away and declare that I think it is not a good idea generically.  However, I am always open minded and can be persuaded with good discussion.   I haven't arranged one ever.   So, it may take some persuasion.

I am struggling to find a list of providers for this somewhat niche product - I can only seem to find Prudential as a provider.

That is probably about it nowadays.  Goodness knows why they still do it.

Malthusian

dunstonh said:

Goodness knows why they still do it.

A vision just popped into my head of the Simpsons episode with the abandoned Krusty Burger on an unmanned oil rig, where Krusty is just about to shut the place down when Homer and co burst in after being marooned at sea and demand fifty Krusty Burgers. The new business desk dealing with With Profits annuities must look a bit like the skeleton staff manning that Krusty Burger.

"Good morning, Prudential? With Profits annuity? Certainly sir, we will forward that to the complaints department who will contact you shortly with a leaflet explaining our timescales and your right to... I'm sorry sir? You don't want to complain about your With Profits annuity? You don't have a With Profits annuity? I'm sorry sir, this is the With Profits annuities department, I'm struggling to understand what your complaint is about. It's not a complaint... I see... You want a new With Profits annuity?? I'm going to put you on hold for a second sir, we're going to need to find a pair of tweezers so we can consult the actuarial tables without them crumbling to dust."

In all seriousness, I am also very interested to hear why the OP wants a With Profits annuity.

The principle behind investment linked annuities is that you accept a lower level of starting income than a conventional annuity in exchange for the hope that it pays more if markets go up. The problem is that people who are happy to lose out if investments do badly in exchange for a higher income if they do well, don't buy annuities.

And you sacrifice all control over the investments (you can't transfer your annuity to another fund manager if your insurer underperforms), which is a very poor fit with a product that depends on investment performance. With a conventional annuity you at least get the assurance that the insurer's fund management performance is not your problem, in exchange for the loss of control. (Even if the insurer mismanages its investments so badly that it goes bust, the FSCS and ultimately the taxpayer steps in.)

And it violates the rule that annuity income is more valuable earlier in life when you are more active.

Now on top of that cut-and-shut of a product, you add the smoke and mirrors of With Profits. So if your income isn't going up, you can't even be certain whether the investments are doing badly or whether the actuary is holding back growth.