Buying an Annuity young?

MrE1

I've read online one can buy an annuity at any age (ie swap a lump sum for an annual salary for life). 

Does any one have their own experience of this and know where to buy one?  I'm 37 

Sandtree

You can but people complain about the rates on annuities bought at retirement and buying earlier will result in worse rates and crippled by 50 years + of admin fees which inflate each year.

I assume you want the payments to start straight away and not have it in deferment 

dunstonh

Does any one have their own experience of this and know where to buy one?

Theoretically possible, but commercially, a total no go.  No sensible website would even hint that it is a good idea.

bostonerimus

Are you talking about an immediate annuity or a deferred annuity? Would it be linked to some other insurance component. Be very careful as these products can be complicated and potentially expensive, but they might be complimentary to other pension and investing provisions like SIPPs and ISA.

FYI when I was young I bought a deferred annuity that credited at an annual rate linked to prevailing interest rates (I'm in the US so such products might not be available in the UK) . I can turn it into a lifetime annuity at any time to provide lifetime income. It is a conservative investment that provides diversity to my portfolio and a foundation to my other stock market investments. So think of an annuity as just one component of your total finances. Right now an annuity will be expensive because interest rates are still low, but as they go up you will get more income for your lump sum.

wmb194

MrE1 said:

I've read online one can buy an annuity at any age (ie swap a lump sum for an annual salary for life). 

Does any one have their own experience of this and know where to buy one?  I'm 37 

You can guarantee that the rate would be awful. You could sort-of do it yourself by buying long dated gilts e.g., the current annual yield to maturity on the benchmark 30 year gilt is 2.08%. The insurer would probably use these rates as a starting point as well.  Anything inflation linked would no doubt be exceptionally low to begin with.

eskbanker

MrE1 said:

I've read online one can buy an annuity at any age (ie swap a lump sum for an annual salary for life). 

Does any one have their own experience of this and know where to buy one?  I'm 37 

On the assumption that the annuity route is a non-starter, what are you trying to achieve?  Your other threads about using a modest lump sum to invest standalone or via a pension seem like much better ideas - what's your thinking behind dismissing those more mainstream options?

Thumbs_Up

Sandtree said:

 worse rates and crippled by 50 years + of admin fees which inflate each year.

Didn't know that, thought it was a one off payment ref admin fees. No wonder they have BMW's on the drive.

dunstonh

Thumbs_Up said:

Sandtree said:

 worse rates and crippled by 50 years + of admin fees which inflate each year.

Didn't know that, thought it was a one off payment ref admin fees. No wonder they have BMW's on the drive.

BMWs are nothing special in terms of cost.  Especially at the fleet or budget model end.   And actuaries for insurers are not the most well-paid jobs.   Annuities don't have explicit charges anyway.   You get the annuity terms at the outset.   The margin on annuities for an insurer are less than a savings account for a bank.

JohnWinder

I won’t push you to an annuity but we don’t want a fully one sided discussion.

You could sort-of do it yourself by buying long dated gilts e.g., the current annual yield to maturity on the benchmark 30 year gilt is 2.08%.

Yes, but if you’re still alive in 31 years the bonds are no longer paying but the annuity is/should be.
And yes, but the bonds don’t have the benefit of mortality credits ie some of the annuitants will die early leaving money to pay those who live loooong.
And yes, it won’t pay as much each year compared with buying it at age 57 years, but you’d have 20 years of income the later annuitant never got. 
But you give up a lot of opportunity by handing over your money at age 37.

wmb194

JohnWinder said:

I won’t push you to an annuity but we don’t want a fully one sided discussion.

You could sort-of do it yourself by buying long dated gilts e.g., the current annual yield to maturity on the benchmark 30 year gilt is 2.08%.

Yes, but if you’re still alive in 31 years the bonds are no longer paying but the annuity is/should be.
And yes, but the bonds don’t have the benefit of mortality credits ie some of the annuitants will die early leaving money to pay those who live loooong.
And yes, it won’t pay as much each year compared with buying it at age 57 years, but you’d have 20 years of income the later annuitant never got. 
But you give up a lot of opportunity by handing over your money at age 37.

So when it matures you buy another gilt or an annuity or whatever. Obviously you could be looking at a capital loss but you can also change your mind and sell them at any point. If you croak someone can inherit them. There's no changing your mind with an annuity.

MrE1

Thank you everyone