Sense check on annuity quotes

Brie

Hey all

I was under the impression that my DC funds wouldn't give me much of a ongoing pension and was looking at simply doing drawdown.  But then someone here suggested getting a "comparison site" quote from MoneyHelper which looks much better than I expected.

So tell me if you think this is right or whether you want to burst my happy bubble:

Total fund £140k
Start taking in a few months when I turn 66 and start getting SP.
Nothing left at the end.
25 year term would give me £802 a month
20 year term would give me £958 a month

So what I'm seeing with this is that in 20 or 25 years (depending on which I choose) the money would stop completely.  But if something happened to me before the end of the chosen term the money would be paid to someone else.

fyi - I'll be getting full SP, have a DB in payment and am expecting (!!!) a substantial legacy at some point that could also be put into a different annuity (or something) at some point.

Brie

Oh and happy to know what questions I should be asking about this or info I might not have considered.

Dazed_and_C0nfused

Are they fixed amounts for the respective term or is there any annual increase?

Linton

The figures look about right for a fixed rate fixed term annuity.  Of course the income will be taxed.

To continue  @Dazed_and_confused's point if you had taken the £802 offer in 1998 it would now be worth about £440.

OldScientist

Brie said:

Hey all

I was under the impression that my DC funds wouldn't give me much of a ongoing pension and was looking at simply doing drawdown.  But then someone here suggested getting a "comparison site" quote from MoneyHelper which looks much better than I expected.

So tell me if you think this is right or whether you want to burst my happy bubble:

Total fund £140k
Start taking in a few months when I turn 66 and start getting SP.
Nothing left at the end.
25 year term would give me £802 a month
20 year term would give me £958 a month

So what I'm seeing with this is that in 20 or 25 years (depending on which I choose) the money would stop completely.  But if something happened to me before the end of the chosen term the money would be paid to someone else.

fyi - I'll be getting full SP, have a DB in payment and am expecting (!!!) a substantial legacy at some point that could also be put into a different annuity (or something) at some point.

The amounts look sensible in the context of 25 years with an effective interest rate of 5.2% (i.e., after fees). The payout is better than you could currently get by constructing a nominal 25 year bond ladder (not that that would be a particularly sensible thing to do).

Two things to look at:

1) The moneyhelper tool gives quotes for single fixed term annuities (i.e. not joint)
2) According to the FAQ at moneyhelper, "All our quotes for Fixed Term Guaranteed Income Products include some protection in case you die during the term. But be aware that providers treat this protection differently. Some providers will repay a lump sum to your estate or beneficiaries that represents the amount of pension pot used to buy the income LESS the income paid out before your death. Others offer a higher protection and will continue to pay the income until the end of the term as well as any maturity value you asked for. You will need to check with each provider what level of protection they are including."

As an alternative thought, a single life, level annuity with a 25 year guarantee would pay out about £775 monthly and would last your life time.

As others have said, inflation could potentially reduce the real value of the income over time.

Brie

Thanks all - it's the first figures I've seen for getting an annuity from my DCs hence me taking a cautious approach.  

I think in order to put anything in motion I'm supposed to get a proper quote from HUB and talk to an adviser.  All of which I will do of course.  

I shall look for options that have a rising figure and how any payouts might  be should I have a bad argument with a bus a short time into the term.  I don't think joint will work in my/our favour particularly as my OH while a couple of years younger has some serious health issues.  And 25 years would take me to 91, a bit younger than my mom is now but not much.