Have we reached peak annuity rates?

RogerPensionGuy

Posts above from dunstonh, OldScientist & Nebulous2 are super helpful, thank you all.

I did like the phrase moron premium and think it's very valid, the government did indeed come to power at a particularly awkward time and probably needed a more firm direction of policies and keep to the policies espically considering its majority.

Unfortunately the initial 16 months has gone very awkwardly and is now sitting between a slippery rock and a slippery rock.

I don't think there's any magical bunnies avaliable at the next or soon following budgets unfortunately, so the next few years look messy and low confidence. 

For my personal situation the current annuity rates seam to fit well and will probably buy a couple in the next 4 or 6 weeks is my feeling today. 

My SIPP provider has just produced all the paperworks to remove my remaining TFLS and I'll ask them for quotes and pop to see an IFA I saw last year. 

Tks again to 3 posters above, very informative and pretty similar to what is in my head. 

Cheers Roger. 

dunstonh

I did like the phrase moron premium and think it's very valid, the government did indeed come to power at a particularly awkward time and probably needed a more firm direction of policies and keep to the policies espically considering its majority.

It's a phrase used by the markets.  It came into existence following the Truss budget.  Sunak managed to reverse some of the moron premium as the markets considered him a safer pair of hands.   However, the moron premium returned under the current Government due to its failed attempts to reduce benefits whilst at the same time increasing public sector spending and then increasing the wrong taxes (where increases can result in less tax take).       

This Budget will be crucial, as it will signal to the markets whether the government intends to exacerbate the problem further or indicate a shift in policy direction.

As nobody here knows what the Budget is going to be, you have to make a judgment call.  Ultimately, the odds of you picking the peak point are low.      However, you are at 17 year highs.  Any increases are not likely to be large.  So, is it worth the risk of delay if you can achieve your objectives now?

RogerPensionGuy

Reference the moron factor, I don't think it can be fixed at a single budget, so I expect that factor to remain very much in the markets over the next 8 to 12 months minimum until that view is shifted. 

Looks to me like they over promised on too much stuff, continually talked it down and then not just under delivered, they achieved more debts chasing savings, foot shooting at every opportunity.

And altho I like catching a falling or bouncing knife, I normally miss it, history will reveal how lucky I am on this endeavour, but matters not as I'm locking in to certainty and that's what I want way before age 70.

RogerPensionGuy

A slight update on sleepy me, I kept putting off buying an annuity and kept checking rates and getting re-quotes, they just pushed up a little bit more yesterday and altho I am getting older daily, the rate/offering I was offerd is the max pound for pound, so I have finally started to buy an annuity yesterday via one of the big brokers offering a remote service via phone calls and internet.

I have decided to use 50% of my SIPP now to buy this annuity and once in place I will review my feelings to buy another annuity in the future or possible drawdown. I am still mulling over buying a purchased annuity.

Just interested in any views people have on annuity rates the rest of this year?

Also, if the annuity insurance companies guess/feel inflation will be higher these next few years, will RPI and LPI annuities tend to be become more or less expencive to buy(purchase price Vs initial output) my guess is gilts are trending up so LPI/RPI or fixed annuities will just also trend up and we will see annuities trending up these next 6 to 12 months, any views welcome please?

Bostonerimus1

I generally like the idea of using some of your retirement pot to buy an annuity for a baseline of income and then the rest of your money can give you growth, flexibility and the possibility of a legacy for your heirs.

I imagine index linked annuities will get even more expensive as macro economics and geopolitical issues seem to be inflationary right now. I live in the US and it's getting more difficult to buy an index linked annuity. About 40 years ago I purchased a deferred annuity and I think it's time for me to turn it into a lifetime income, but it won't be index linked as my insurance company no longer offers that option.

kempiejon

Looking at buying a baseline income, giving up some accumulated funds of course becomes an easier choice when rates are above 4% rather than when they were less than 2%. I still believe I can best annuity rates with my investments but as part of catastrophe planning it might useful, especially if something were to happen to me. The security that an index linked annuity might give me and mine in a global equity collapse does have some value.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81986703#Comment_81986703

The longer you live the better value a lifetime annuity becomes. A payout rate of 7% or 8% for a flat lifetime annuity naturally makes them appear more attractive to most people and if they live well past the average life expectancy the performance of the annuity as an "investment" will approach that of a pot of money returning an annual average of 7% or 8%. But an annuity should NOT be seen as an investment, it's an income diversifier and longevity insurance.

ali_bear

I am currently in the process of buying an annuity. It is not the quickest transaction you can think of. More like buying a house. If I look at fresh quotes I'm not sure if they are going up because of increasing rates or just because I'm getting older.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81986703#Comment_81986703

Although in a global equity collapse, it is unlikely that inflation will be high, so you would probably be better with a level annuity paying a higher income in that case.

Decisions…

kempiejon

https://forums.moneysavingexpert.com/discussion/comment/81986798#Comment_81986798

Ta. Now that's an extra wrinkle I have to ponder, I have generally leant towards index linked as the better for income protection and longevity insurance. As you say decsions. Global equity collapse is lower down the hierarchy of worries than than my elimination in risk management so I lean towards IL. So far annuitites are not active in the plan.