Should I buy an annuity now or wait?

higgle

I'm retiring at the end of August with a pension pot which will be £140k, maybe a little more. I'll take the £35k lump sum and invest rest in a way i have not yet made a final decision on. I have a state pension of £10,900 and with my husband's pension we will have a total income of just under £50k gross if I allocate anticipated income from the £100k. My husband is till working part time so we have another £19k from that. I do not want to spend my retirement managing or worrying about the income from the £100k so I'm thinking of buying an annuity. The best quote I have had so far is just over £6k which is guaranteed for 10 years and with 50% to my husband if I die first.We own our house free of mortgage and have some other savings so I'm not worried about keeping any of this particular fund back for my children. At the moment I'm thinking of holding back until the next Bank of England interest rate review just to see if I can get a bit more. This seems to make sense to me, especially as the payment will enable me to save a little and thereby save to do a DiY inflation increase out of the savings. As the general view is still anti annuity it would be good to get some opinions on this. My husband has always been public sector - they have it so much easier on the pensions front!

Sandtree

Do you need the guarantee period or even the spousal component? The more options you add clearly the less you'll be getting "now"

bostonerimus

Annuities are definitely back in the mix with rates rising and people worrying about falling DC pension pots. If you go with an annuity make sure you factor in inflation as the worth of a flat annuity could be hit hard by an extended period of high inflation.
One question I have is what are you doing with your tax free 25% lump sum?

higgle

The cost of the guarantee was very small. The spousal benefit is important to me as I will get half of all my husband's pensions if he dies before me and it seems very mean not to do the same for him. We could do with the lump sum to sort out the house, and I might buy a horse. 

Albermarle

Maybe not directly relevant but £50K gross for a couple is at the upper end of most peoples retirement income, if you ignore a small % of  wealthy/big spenders. Plus still a part time salary coming in.
An annuity with taxable income may not be the best choice, if you did not in the end need the income. 
Home - PLSA - Retirement Living Standards

higgle

I read the Retirement living standards a while ago, it is very strange and the assumptions are no long haul travel but spending £100 a year on perfume. Very high expenditure on eating out but a £50 birthday present for your spouse (I wouldn't have a spouse if I did that!) I'm sure is is a good guideline. I just wondered if anyone thinks interest rates and annuity rates will rise much more, if so I'd certainly be better off living off savings for a year or two.

dunstonh

The best quote I have had so far is just over £6k which is guaranteed for 10 years and with 50% to my husband if I die first.

Why 10 year guarantee?  Why not 20 or 30?  
How about value protect instead of a guarantee period?
Or 100% spouse with no guarantee (or with value protect on second death)

As the general view is still anti annuity it would be good to get some opinions on this. 

The general view is not anti-annuity.      Annuities have been out of favour due to low interest rates.  They will come back in favour as rates rise.   And you are already starting to see viable quotes again. 

Sandtree

higgle said:

The spousal benefit is important to me as I will get half of all my husband's pensions if he dies before me and it seems very mean not to do the same for him. 

Presumably you are pooling your monies and its not what's mine is mine?

Ultimately it is your choice and maybe you are much older and in poorer health and so confident that they will significantly outlive you but assuming roughly equal age and health then its more likely a wife will outlive their husband than the other way around. 

Having more money when there is still the two of you, two mouths to feed, two tickets to book on holiday etc would make more sense to me than having his pension bumped from £50k to £53 if/when there is just him left and only solo plane tickets to buy. 

[Deleted User]

Its a sound plan if you don’t want to manage investments.

Otherwise, you already have a lot of fixed income, so having equity wouldn’t be much of a risk in terms of forcing you into abject poverty if market tanks. I am a huge fan of annuities for people who have a large investment pot and no FI except for state pension but you are not in that position.

higgle

I'll get some more quotes with different guarantees/spousal payment. The people who did this initial sweep for me are called "The Retirement Room", it was a Scottish Widows annnuity that came out top.

Albermarle

higgle said:

I read the Retirement living standards a while ago, it is very strange and the assumptions are no long haul travel but spending £100 a year on perfume. Very high expenditure on eating out but a £50 birthday present for your spouse (I wouldn't have a spouse if I did that!) I'm sure is is a good guideline. I just wondered if anyone thinks interest rates and annuity rates will rise much more, if so I'd certainly be better off living off savings for a year or two.

Of course you can query some of the assumptions of any survey. Which do a similar one. It makes different assumptions but comes out with similar/slightly lower figures.
The one I linked to has been updated but presumably after this year, you would need to add on 10% for inflation.