Timing an annuity purchase

randompenitent

I retired 18 months ago with a chunk of ISA and SIPP money and no thoughts (or very few) of buying an annuity. After all, with interest rates at less than 2% and seemingly stuck that way forever, an annuity seemed like a crazy idea.

Perhaps the next twelve months will provide time to reconsider. After the economic masterstroke of our new Chancellor, it seems possible that interest rates will hit 6% by 2023. 15 year gilt yields are at a whisker under 4.4% which is a big jump from 1.14% at the start of the year and presumably means we can expect some significantly better annuity deals shortly.

What does everyone else think? 

westv

I have similar thoughts even if it were only partial annuitisation.
I won't be using my SIPP for a couple of years yet but I do check annuity rates now and again out of curiosity  

Albermarle

There are ( and will be more) a growing number of  positive comments about taking an annuity in various threads.
When a theoretical safe drawdown rate is < 4%, improving annuity rates start to look more attractive.
The downside is of course with a drawdown there is still a good chance there will be big chunk of it left to pass on when you die.

LV_426

Albermarle said:

There are ( and will be more) a growing number of  positive comments about taking an annuity in various threads.
When a theoretical safe drawdown rate is < 4%, improving annuity rates start to look more attractive.
The downside is of course with a drawdown there is still a good chance there will be big chunk of it left to pass on when you die.

That's a key thing for me.

westv

For me, there is no need for a legacy apart from to my spouse.

randompenitent

I've no legacy to worry about either, just a wife who is younger than I am and likely to outlive me at some (hopefully distant) point in the future.  Clearly if you're looking to leave money for children or for other reasons, an annuity loses much of its appeal, but for those of us who are just looking for a means of living well during the time left to us, the near-certainty that an annuity would bring definitely has some attractions.

If I could buy my desired income with a good degree of inflation protection, I might just go for it.  

dunstonh

If you are not interested in legacy, then an annuity is quite possibly just around the corner from being viable for some or all of the taxable element.

GSP

dunstonh said:

If you are not interested in legacy, then an annuity is quite possibly just around the corner from being viable for some or all of the taxable element.

Sorry dunstonh what do you mean, all of it taxable or tax free? Or something else?
I am in drawdown and currently have a third uncrystallised, two thirds crystallised and taxable and wonder how this would apply to both elements.
Thanks

dunstonh

Sorry dunstonh what do you mean, all of it taxable or tax free?

You only use the 75% part (taxable bit) to buy the annuity.  You don't use the 25% (tax free).

So, if there is any 25% left, you would take that and use the remaining 75% bit to buy the annuity.

I am in drawdown and currently have a third uncrystallised, two thirds crystallised and taxable and wonder how this would apply to both elements.

you would crystallise the remaining amount and take the 25% due.  Then purchase an annuity with the rest.

GSP

dunstonh said:

Sorry dunstonh what do you mean, all of it taxable or tax free?

You only use the 75% part (taxable bit) to buy the annuity.  You don't use the 25% (tax free).

So, if there is any 25% left, you would take that and use the remaining 75% bit to buy the annuity.

I am in drawdown and currently have a third uncrystallised, two thirds crystallised and taxable and wonder how this would apply to both elements.

you would crystallise the remaining amount and take the 25% due.  Then purchase an annuity with the rest.

Great, thanks.

bostonerimus

dunstonh said:

Sorry dunstonh what do you mean, all of it taxable or tax free?

You only use the 75% part (taxable bit) to buy the annuity.  You don't use the 25% (tax free).

So, if there is any 25% left, you would take that and use the remaining 75% bit to buy the annuity.

I am in drawdown and currently have a third uncrystallised, two thirds crystallised and taxable and wonder how this would apply to both elements.

you would crystallise the remaining amount and take the 25% due.  Then purchase an annuity with the rest.

Just interested...if you took the 25% tax free amount and put it into an ISA could you then buy an annuity inside the ISA and get tax free income?