Annuity’s Becoming More Attractive?

GSP

Some six months ago, I believe the general consensus was that rates would start to fall in the second half of the year. It seems that idea has been pushed back further, and quite what expectations are now when they will be cut?

I wonder what the latest rise will do to various annuity rates?

I’m sure there was an annuity product (can’t remember the terminology) where it more or less paid you about 5% p.a. for three years whilst retaining the amount invested if anyone has that name?

westv

It does appear that higher rates may last longer than may have been expected. I wonder if we will see any new players in the market.

GSP

https://forums.moneysavingexpert.com/discussion/6416590/fixed-term-annuity-calculator-and-any-thoughts/p1

Found it in an old thread of mine.
Product name I was after is Fixed Term Annuity.

OldMusicGuy

I bought an inflation linked annuity aged 65 at the end of last year when rates were slightly down from the peak and I thought it was pretty good value. It looks like rates are back to where they were at the end of last year, so I would say they are definitely worth a look.

I used part of my DC pot to buy an annuity to give me a base of inflation-linked income (along with my SP) as I have no DB pension. Very happy with my choice, but I am quite risk averse so it's helping me sleep soundly. 

GSP

OldMusicGuy said:

I bought an inflation linked annuity aged 65 at the end of last year when rates were slightly down from the peak and I thought it was pretty good value. It looks like rates are back to where they were at the end of last year, so I would say they are definitely worth a look.

I used part of my DC pot to buy an annuity to give me a base of inflation-linked income (along with my SP) as I have no DB pension. Very happy with my choice, but I am quite risk averse so it's helping me sleep soundly. 

Pleased you have found the opportunities OMG, and are sleeping better!

I’m nearly 61 with a flexible drawdown fund of £630k, of which £45k is tax free.
My wife is 55, with a flexible drawdown fund of £145k, of which £35k is tax free.

Obviously, we are younger and further away from SP compared to you (6 and 11 years), but wondering if we could use a fixed term annuity at this time, maybe for part of the fund, or all of it less the tax free portion.

There are probably a number of scenario’s which could help us, and most likely some we haven’t seen yet.

Albermarle

GSP said:

OldMusicGuy said:

I bought an inflation linked annuity aged 65 at the end of last year when rates were slightly down from the peak and I thought it was pretty good value. It looks like rates are back to where they were at the end of last year, so I would say they are definitely worth a look.

I used part of my DC pot to buy an annuity to give me a base of inflation-linked income (along with my SP) as I have no DB pension. Very happy with my choice, but I am quite risk averse so it's helping me sleep soundly. 

Pleased you have found the opportunities OMG, and are sleeping better!

I’m nearly 61 with a flexible drawdown fund of £630k, of which £45k is tax free.
My wife is 55, with a flexible drawdown fund of £145k, of which £35k is tax free.

Obviously, we are younger and further away from SP compared to you (6 and 11 years), but wondering if we could use a fixed term annuity at this time, maybe for part of the fund, or all of it less the tax free portion.

There are probably a number of scenario’s which could help us, and most likely some we haven’t seen yet.

There appears to be a few variations on a fixed term annuity. Some you pay your money and never see it again ( like a traditional annuity). Some return part of the money at the end ( of course they pay a lower annual annuity) . You can also buy insured ones in case you die during the annuity. Plus probably other variations.

GSP

Albermarle said:

GSP said:

OldMusicGuy said:

I bought an inflation linked annuity aged 65 at the end of last year when rates were slightly down from the peak and I thought it was pretty good value. It looks like rates are back to where they were at the end of last year, so I would say they are definitely worth a look.

I used part of my DC pot to buy an annuity to give me a base of inflation-linked income (along with my SP) as I have no DB pension. Very happy with my choice, but I am quite risk averse so it's helping me sleep soundly. 

Pleased you have found the opportunities OMG, and are sleeping better!

I’m nearly 61 with a flexible drawdown fund of £630k, of which £45k is tax free.
My wife is 55, with a flexible drawdown fund of £145k, of which £35k is tax free.

Obviously, we are younger and further away from SP compared to you (6 and 11 years), but wondering if we could use a fixed term annuity at this time, maybe for part of the fund, or all of it less the tax free portion.

There are probably a number of scenario’s which could help us, and most likely some we haven’t seen yet.

There appears to be a few variations on a fixed term annuity. Some you pay your money and never see it again ( like a traditional annuity). Some return part of the money at the end ( of course they pay a lower annual annuity) . You can also buy insured ones in case you die during the annuity. Plus probably other variations.

Yes Albermarle, there’s a lot to weigh up, and quite what we will do?

GSP

westv said:

It does appear that higher rates may last longer than may have been expected. I wonder if we will see any new players in the market.

I suppose if he is watching, dunstonh may have a view on that?

dunstonh

GSP said:

westv said:

It does appear that higher rates may last longer than may have been expected. I wonder if we will see any new players in the market.

I suppose if he is watching, dunstonh may have a view on that?

You can never underestimate financial services companies' ability to see and exploit an opportunity.   However, with so many of the old insurance companies closing their old life books and selling them off and getting rid of staff etc, I am not sure the outlay they will need to reinstate the things could be recovered before annuity rates fall back a bit or markets recover.     Once markets start to recover and investment values go up, those that didn't buy an annuity, will likely not do so as they will become more confident.       At the moment, most people are pessimistic and that will push some towards an annuity.

GSP

dunstonh said:

GSP said:

westv said:

It does appear that higher rates may last longer than may have been expected. I wonder if we will see any new players in the market.

I suppose if he is watching, dunstonh may have a view on that?

You can never underestimate financial services companies' ability to see and exploit an opportunity.   However, with so many of the old insurance companies closing their old life books and selling them off and getting rid of staff etc, I am not sure the outlay they will need to reinstate the things could be recovered before annuity rates fall back a bit or markets recover.     Once markets start to recover and investment values go up, those that didn't buy an annuity, will likely not do so as they will become more confident.       At the moment, most people are pessimistic and that will push some towards an annuity.

It’ll be ‘interesting’ if and when rates do go down, will they go down to the 0.5% we saw for so many years, because previous to that that wasn’t the norm.

Malthusian

If you did buy a fixed term annuity, what would you do with the maturity value at the end? 
If the answer is "buy another fixed term annuity and hope rates haven't dropped", why not just buy a lifetime annuity?