Annuities 6 March at 4:53PM edited 6 March at 4:54PM in Pensions, annuities & retirement planning 6 replies 464 views

nonolerigolo

Is it possible to buy an annuity at 35 ish years old as part of retirement Planing. Could it be bought with a pension? Would I still be able to contribute to the pension or limited to the £4,000 annually 

the rate of annuities have improved hence the question.

If not possible to buy an annuity is there any other alternative ? Gilts ? Thank you very much 

bostonerimus

Are you talking about a "deferred annuity" ie you buy the annuity now and won't be taking income from it until say 65? You should talk to an IFA and insurance companies for such products. Pay particular attention to the fees involved and avoid variable annuities that rely on investment returns, save that for your ISA, SIPP and workplace pension. A fixed deferred annuity might be a useful part of the fixed income component of your retirement plan

nonolerigolo

Yes I am talking about defered annuities 

nonolerigolo

Is there Any benefit of taking such a “defered annuities” as opposed to index linked gilts? 

coyrls

I don't think you can buy any form of annuity (including defered, if they are even available in the UK, I am not sure they are) before you are 55.

JohnWinder

Yes, but inflation linked gilts. https://www.bogleheads.org/forum/viewtopic.php?t=286603

Mortality credits is a benefit of lifetime annuities that no alternative has.

OldScientist

There's some useful info about deferred annuities at https://www.onlinemoneyadvisor.co.uk/pensions/pension-annuities/deferred-annuity/

As others have said, you may not be able to buy one with your pension until you are 57 (they appear to be so little used in the UK, there isn't a lot of info out there). Hopefully, some more knowledgeable people will chip in.

As others have said, a DIY version would be to buy inflation linked gilts with a maturity date close to your expected retirement age (or whenever you want to buy the annuity). 30 year inflation linked gilts currently have a real yield to maturity of about 0.5%. You could consider these as part of the (or entire) bond allocation in your portfolio (although at your age, your stock/bond allocation might be significantly weighted towards stocks). You would then gradually add to this holding as you build up your pension pot (although the yield will vary with time).

As JohnWinder said, the DIY approach does not include mortality credits (which, to be fair, at your age are relatively small).