Annuities

Justso65

Just as a matter of interest I decided to look around on annuity rates.  It’s not something I had considered and after looking I have only had that reinforced.

As an example I used L&G’s annuity calculator.

https://www.legalandgeneral.com/retirement/pension-annuity/pension-annuity-calculator/

Whilst they do quote a for life pension on £19800 which obviously has a level of risk based on how long I might live they quote a 10 year pension with and without a lump sum at the end which seem very low.  For a £500k pension pot they offer £44460 per year or £40470 plus £50,000 at the end of 10 years.  Considering the cost to L&G of both of those 10 year options are less the value of my pot why would anyone consider that?  I could cash in my pension investments and drawdown more than that from a SIPP account.  Unless I am missing something?  I naively thought they would offer a total more than my pot based on their expectations on being able to grow the pot to some extent even if only by a small amount.

As usual, thanks for any comments.  

JS

Dazed_and_C0nfused

Justso65 said:

Just as a matter of interest I decided to look around on annuity rates.  It’s not something I had considered and after looking I have only had that reinforced.

As an example I used L&G’s annuity calculator.

https://www.legalandgeneral.com/retirement/pension-annuity/pension-annuity-calculator/

Whilst they do quote a for life pension on £19800 which obviously has a level of risk based on how long I might live they quote a 10 year pension with and without a lump sum at the end which seem very low.  For a £500k pension pot they offer £44460 per year or £40470 plus £50,000 at the end of 10 years.  Considering the cost to L&G of both of those 10 year options are less the value of my pot why would anyone consider that?  I could cash in my pension investments and drawdown more than that from a SIPP account.  Unless I am missing something?  I naively thought they would offer a total more than my pot based on their expectations on being able to grow the pot to some extent even if only by a small amount.

As usual, thanks for any comments.  

JS

You seem to have forgotten to include the TFLS.

£125,000 + £404,700 + £50,000 = £579,700

Or

£125,000 + £444,600 = £569,600

Not saying they're great but you do get more than the £500k you started with.

Justso65

Doh !  That’s exactly what I’ve done.  Wine and financial research don’t go well together.

JS.

NlghtOwl

I’m sure you’re just playing with the calculator but The annuity provider would also expect to grow the lump sum over the years in the same way you would expect to grow a drawdown pot. It’s worth looking at an annuity to cover basic expenses but I wouldn’t consider handing over a lump sum of that size, so I could keep some control and include in inheritance etc.