Annuity rates on the up, is now a time to buy one?

DIYPhil

Mick70 said:

are there any websites where you can get a quote for an annuity , one that would rise each year with inflation , rather than remain the same for its lifetime.    the way you can get a car insurance quote on moneysupermarket etc 

Try Retirement Line

Mick70

Thumbs_Up said:

Mick70 said:

are there any websites where you can get a quote for an annuity , one that would rise each year with inflation , rather than remain the same for its lifetime.    the way you can get a car insurance quote on moneysupermarket etc 

Try this...

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities

tried this this site 

Based on a £250k pot, age 56, single annuity, rising rpi, 10 year guarantee and only generated annuity of £8.3k, thought it might have been higher

westv

Mick70 said:

Thumbs_Up said:

Mick70 said:

are there any websites where you can get a quote for an annuity , one that would rise each year with inflation , rather than remain the same for its lifetime.    the way you can get a car insurance quote on moneysupermarket etc 

Try this...

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities

tried this this site 

Based on a £250k pot, age 56, single annuity, rising rpi, 10 year guarantee and only generated annuity of £8.3k, thought it might have been higher

What were you hoping for? 

OldScientist

Mick70 said:

Thumbs_Up said:

Mick70 said:

are there any websites where you can get a quote for an annuity , one that would rise each year with inflation , rather than remain the same for its lifetime.    the way you can get a car insurance quote on moneysupermarket etc 

Try this...

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities

tried this this site 

Based on a £250k pot, age 56, single annuity, rising rpi, 10 year guarantee and only generated annuity of £8.3k, thought it might have been higher

A payout rate of about 3.3% - not too bad when compared with the historical 44 year (i.e., assuming a planning horizon to 100yo - for a 56 year old, there's an estimated 3.7-6.5% chance of exceeding that age, see https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07 ) SWR of 2.4% for a 60/40 (stocks/bonds) portfolio (see https://www.2020financial.co.uk/pension-drawdown-calculator/ ). Although, at 2.7%, this was slightly higher for a 60/20/20 (stocks/bonds/cash) portfolio.

Linton

I suggest that for an annuity you talk to an IFA. As I understand it....
 - Some annuity providers do not deal directly with the public.
 - Annuities can have a very wide range of options that may not be advertised online. Appropriate choice of options and provider can provide the facilities you need without the costs of paying for options you dont need. 
 - If you have any health issues an IFA should be able to use these to maximise your annuity.
 - The deal you get from an IFA after costs should be better than one you can get by going direct as the annuity companies provide better rates via IFAs because it reduces admin costs.  The IFA is incentivised to undercut the  online deals.

Before talking to an IFA it would be sensible to get online quotes so you can make a comparison.

peterg1965

Its unfortunate timing for me, as I am 3 years away form being in a position to stop work and start taking the DC element of my pension income.  With a likely £500,000 sum available (in 3 years when i will be 61), a fixed rate annuity with 50% spousal income and a 10 year guarantee is coming in at about £32,000, this would be compelling.

The alternative, which has been my intent all along, was to do a staged drawdown at £36k for 2 years, reducing to £30k for 3 years, then £24k for the following 14 years (until 80) then £10k a year from then on.  Staging as SP starts (myself and wife) and mortgage paid off.

The prospect of a zero risk £32000/year annuity would trump that drawdown plan in my eyes.

Lets see what the annuity landscape in like at the end of 2026!

RogerPensionGuy

peterg1965 said:

Its unfortunate timing for me, as I am 3 years away form being in a position to stop work and start taking the DC element of my pension income.  With a likely £500,000 sum available (in 3 years when i will be 61), a fixed rate annuity with 50% spousal income and a 10 year guarantee is coming in at about £32,000, this would be compelling.

The alternative, which has been my intent all along, was to do a staged drawdown at £36k for 2 years, reducing to £30k for 3 years, then £24k for the following 14 years (until 80) then £10k a year from then on.  Staging as SP starts (myself and wife) and mortgage paid off.

The prospect of a zero risk £32000/year annuity would trump that drawdown plan in my eyes.

Lets see what the annuity landscape in like at the end of 2026!

You say three years away. 

If you really liked annuity rates at anytime like now, could you not buy an annuity at that point in time?

I'm always amazed when stopping paid employment and activation of pension vehicles appears to be hard linked in a spot time, I've never considered this the case, I am and was always happy to overlap them or a gap in between these matter.

I'm imagine if and when annuity rates jump up another 1% or 2% maybe lots of people will buy annuities before they thought they would.

Notepad_Phil

peterg1965 said:

Its unfortunate timing for me, as I am 3 years away form being in a position to stop work and start taking the DC element of my pension income.  With a likely £500,000 sum available (in 3 years when i will be 61), a fixed rate annuity with 50% spousal income and a 10 year guarantee is coming in at about £32,000, this would be compelling.

The alternative, which has been my intent all along, was to do a staged drawdown at £36k for 2 years, reducing to £30k for 3 years, then £24k for the following 14 years (until 80) then £10k a year from then on.  Staging as SP starts (myself and wife) and mortgage paid off.

The prospect of a zero risk £32000/year annuity would trump that drawdown plan in my eyes.

Lets see what the annuity landscape in like at the end of 2026!

A £32,000 a year annuity sounds good at this moment in time, but if it is a fixed.annuity then it will still be paying that in umpteen years time after who knows how much inflation there's been.

Not such a problem if you have other sources of income that are index linked, but could be more of an issue if you don't and one of you lives a long life. Mrs Notepad's mother lived for nearly 35 years after taking out a fixed rate annuity, she was lucky to have other sources of income that helped, but with only her state pension being index linked she had started to eat into her assets to keep up with inflation.

Pat38493

OldScientist said:

Mick70 said:

Thumbs_Up said:

Mick70 said:

are there any websites where you can get a quote for an annuity , one that would rise each year with inflation , rather than remain the same for its lifetime.    the way you can get a car insurance quote on moneysupermarket etc 

Try this...

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities

tried this this site 

Based on a £250k pot, age 56, single annuity, rising rpi, 10 year guarantee and only generated annuity of £8.3k, thought it might have been higher

A payout rate of about 3.3% - not too bad when compared with the historical 44 year (i.e., assuming a planning horizon to 100yo - for a 56 year old, there's an estimated 3.7-6.5% chance of exceeding that age, see https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07 ) SWR of 2.4% for a 60/40 (stocks/bonds) portfolio (see https://www.2020financial.co.uk/pension-drawdown-calculator/ ). Although, at 2.7%, this was slightly higher for a 60/20/20 (stocks/bonds/cash) portfolio.

What was the payout SWR over that period for an 80/20 or 100/0 portfolio - I suspect it was significantly higher?

Also it depends how you define not too bad - if you look at the median WR that you could have achieved rather than the minimum, it will be a lot higher, and I would have intuited that annuity providers could get closer to the median considering that they are presumably pooling the risk of everyone into one pot.  I guess guarantees are very expensive and you lost all the upside.

michaels

peterg1965 said:

Its unfortunate timing for me, as I am 3 years away form being in a position to stop work and start taking the DC element of my pension income.  With a likely £500,000 sum available (in 3 years when i will be 61), a fixed rate annuity with 50% spousal income and a 10 year guarantee is coming in at about £32,000, this would be compelling.

The alternative, which has been my intent all along, was to do a staged drawdown at £36k for 2 years, reducing to £30k for 3 years, then £24k for the following 14 years (until 80) then £10k a year from then on.  Staging as SP starts (myself and wife) and mortgage paid off.

The prospect of a zero risk £32000/year annuity would trump that drawdown plan in my eyes.

Lets see what the annuity landscape in like at the end of 2026!

I had a look on that site for an RPI annuity with 100% spousal benefit which I reckon is the equivalent to an SWR for someone at age 55 (partner 4 years older) the rate was 2.8% which seems slightly lower than a 40 year swr?