Annuity sanity check

Ciprico

When I was a kid my father persuaded me to take out a pension policy with Scottish Widows (with profits) when I took my first job as an apprentice, over the years
it lapsed and went dormant. When I saw an IFA many years ago to rationalise my pensions he said don't touch this policy. I didn't.

Fast forward 40 years and it is about to mature (age 60/healthy)

It's only £42k and I have been given two quotes/options...

£4,100 pa until death
or
£10k tfls + £3122 pa until death

The accompanying literature stresses what an important decision this is, and strongly advises to get professional advice etc, but when I look at the figures
at face value, unless I've missed something, it's a no brainer to take the first option...

Have I missed something, I have never looked an anuities before and don't know much about them. I appreciated it is taxable income, and is not indexed linked.

I don't need the money atm as still working and contributing to a SIPP via salsac, but to get the rate above the policy in inflexible, ie no delaying, moving, increasing, partial etc.

(I assumed wrongly this policy would mature for £42k and I would simply transfer into existing SIPP, so didn't pay much attention to it)

Do I need to pay for a second opinion...?

Bimbly

I suspect this policy doesn't support drawdown, which is why you haven't been given this option.

However, you could transfer it to another pension product which does - such as your SIPP. Then you have more flexibility.

The one thing to check is whether you have any protected benefits with your SW policy. If you do, you would lose these by transferring.

westv

Presumably it's a single life annuity with no increases for imflation?

Ciprico

It does have protected benefits but is doesn't itemise them... 

It is single life and not index linked

Linton

The annual income figures you quote look like a generous Guaranteed Annuity Rate (GAR) which were fairly common in the 1980s.  They havent been availabe for many years as many of the companies offering them effectively went bust or were taken over when economic conditions changed.  Generally if you go for something very different to what is guaranteed or transfer elsewhere you lose the guarantee.  So with those numbers I suggest you gratefuly accept what is offered.

Ciprico

Thanks Linton. That's what I thought...