Can I buy an Annuity. No pension

Missmarple

My husband and I don't have a pension (other than state pension when 67). We do have buy to let properties and if we sold up would have around 400k. We are both 59 and wondering what to do. We don't want the bother of renting in a few years as we rent to the student market and it is a hassle. Can we buy an annuity, if so is 400k enough for a decent monthly income for us both. We would be mortgage free. 
If anyone has been in this situation I would be interested in what you did. 

GunJack

You could buy an annuity, but you may find it's not great value (I'm sure someone will pop along with some example figures for you). Will you have £400k after capital gains tax when selling the BTL, or less if CGT is due.

You may be better off with a savings ladder or some other method for your dosh. Still working? No workplace pension?

Missmarple

Thanks for the reply, that will be after CGT. The buy to lets are our job and bring in an income, they are mortgaged on interest only. What do you mean by a savings ladder ?

xylophone

Have you both obtained state pension forecasts?

https://www.gov.uk/check-state-pension

Missmarple

Yes but not until 67. It seems on track for the basic pension. We are self employed so have been paying it. 

Dazed_and_C0nfused

Missmarple said:

Yes but not until 67. It seems on track for the basic pension. We are self employed so have been paying it. 

You are self employed and have BTL properties as a separate income stream?

What exactly do your State Pension forecasts show in full?

It's surprising how many people post on here saying their State Pension forecast is all good then when it's suggested they read it more carefully they come back with a different story.

tacpot12

The amount of income you might receive from an annuity will depend on exactly when you take it out (and a number of other factors) . The answer will be quite different if you sell up and buy the annuity next year compared to doing it when you are 65. To get any sort of answer you need to be able to pick a date when you think that letting will be too much bother for you. You also need to know how much protection you want against inflation, and whether you want a Guarantee, and how much the survivor will receive when the first spouse dies. When you do this will also affect how much you receive from the sale. If you delay by five years, you could get another £100,000!

This site suggests you might get less than £10,000pa if you want some protection against inflation. Getting a Joint Life Annuity (onlinemoneyadvisor.co.uk) 

You could look to invest in dividend producing assets. This is my plan for my retirement. I've rented out two properties in the past. I sold one recently and invested the proceeds in a Stocks & Shares ISA. (As a couple you can invest £40,000 per year into a Stocks & Shares ISA). The investments in my SIPP and S&S ISA pay a return of about 4%pa in dividends, and I'm reasonably confident that the assets will increase in value at around 3%pa on average. 4% return on £400,000 would be £16,000 pa. You each have your personal allowance for income tax, so you would pay no tax on dividends at this level. 

To smooth out your income, you could keep in cash an amount that was N x your combined state pension entitlement, when N is the number of years that you have sold up before you reach state retirement ago. e.g. if you sell up 4 years before your state retirement age, you could keep 4 times c£19,000 (£76,000) in cash and invest the rest. Based on your numbers today, this would produce and income of £13,000pa PLUS you would have £19,000pa from your cash. You income would be £32,000 pa with no tax to pay. 

The cash savings could be put into a notice savings accounts with a different length of notice period for each year of income that you are investing. 

Missmarple

No the self employment is from the buy to lets, I know it isn't classed as self employment. None Earned Income. We fill out the self assessment. My husband has a separate business that earns a little but not much. 
When I last looked at the pension forecast I had paid 36 years and was full, husband had a few years missing but will make it up as only about 4 missing. Is this important regarding the annuity ? 

dunstonh

Can I buy an Annuity. No pension

Technically yes.  Although viability is unlikely to be great at this time.   Also there are alternative options to consider.

xylophone

When I last looked at the pension forecast I had paid 36 years and was full, husband had a few years missing but will make it up as only about 4 missing. Is this important regarding the annuity ? 

Your state pension has no effect on the annuity but you would wish to establish your exact situation regarding state pensions.

Why don't you and your husband get up to date forecasts via link above and come back with information as to what exactly they say?

"35 years" may not be relevant to your cases as (because  as you both straddle old and new system) you come under transitional arrangements.

Your husband appears to have  modest  "relevant earnings". Has he considered contributing as much as possible to a  personal pension?

You have no relevant earnings but each tax year could still contribute up to a net £2880 to a personal pension and receive tax relief of £720.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/

See

https://forums.moneysavingexpert.com/discussion/comment/79238253/#Comment_79238253

arnoldy

Missmarple said:

My husband and I don't have a pension (other than state pension when 67)...if we sold up would have around 400k...Can we buy an annuity? 

This is a seriously bad idea IMO. That 400k is tax free, if you get an annuity the income from that would be taxable when SP kicks in. Why an earth would you want to do that? You are better off drip feeding into an ISA with a sensible income generating portfolio that should give you £16k pa or so with no tax to pay.

And anyway annuities have loads of other issues apart form those index linked which are unaffordable/poor value so also not good.