Fixed term annuity

Pat38493

Hi - are there any sites that offer tables or quotes for fixed term annuities?

As I understand it, you choose a fixed term and then you get a quote for a particular rate of return, inflation linked or not, and you can then also choose whether you want some of the capital back at the end in exchange for lower monthly payments? 

And you can tailor this so you could say for example, I have a £200K pot and I want to buy a fixed term annuity for 10 years, and I want £30K back at the end in (close to) real terms?  

Is that right?

flaneurs_lobster

There's a guide to annuities including calculators for different options and quotes here

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

SVaz

That was interesting.
I put my age as 65,  £100000 got me £9200 a year plus £50k back after 10 years.   

Or £9000 a year and £80k back after 5 years.  

Pat38493

flaneurs_lobster said:

There's a guide to annuities including calculators for different options and quotes here

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

Interesting.  Are these actual official quotes that it's coming up with?

Also I assume these are fixed payments with no increase for CPI?  Is it possible to get a fixed term annuity with inflation protection as the tool doesn't offer this option?

It seems like there are some strange quirks where you can get better results with different inputs that don't feel right.

Start with 300K

e.g. £280K amount (keeping 20K back) for 10 year with no money back at all - £35912 per year.

£300K amount for 10 years with £20K back at the end - £36953 per year.

That feels like I'm getting a better offer on the second one?

Bianchiintenso

I tried it with having the same initial sum returned, interesting

Albermarle

Pat38493 said:

flaneurs_lobster said:

There's a guide to annuities including calculators for different options and quotes here

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

Interesting.  Are these actual official quotes that it's coming up with?

Also I assume these are fixed payments with no increase for CPI?  Is it possible to get a fixed term annuity with inflation protection as the tool doesn't offer this option?

It seems like there are some strange quirks where you can get better results with different inputs that don't feel right.

Start with 300K

e.g. £280K amount (keeping 20K back) for 10 year with no money back at all - £35912 per year.

£300K amount for 10 years with £20K back at the end - £36953 per year.

That feels like I'm getting a better offer on the second one?

I presume that is because they have the £20K in their hands for 10 years, to make a return on?

Albermarle

Bianchiintenso said:

I tried it with having the same initial sum returned, interesting

With inflation say at 5%pa, the £400K you get back, and the £210K paid out would actually be worth a lot less over 10 years In the meantime they have made money on having your £400K . Presumably that is how it works.

Bianchiintenso

I think I'll take my chances with investing the 400k myself

sparklymarkly

Pat38493 said:

Hi - are there any sites that offer tables or quotes for fixed term annuities?

As I understand it, you choose a fixed term and then you get a quote for a particular rate of return, inflation linked or not, and you can then also choose whether you want some of the capital back at the end in exchange for lower monthly payments? 

And you can tailor this so you could say for example, I have a £200K pot and I want to buy a fixed term annuity for 10 years, and I want £30K back at the end in (close to) real terms?  

Is that right?

Legal and General offer fixed term annuities and you can create quotes of varying lengths etc.
I have just taken one out and I found their site very helpful when deciding what to do.
There didn’t seem to be many options available for short term annuities and I only wanted one for a relatively short period rather than a lifetime one which most sites seem to offer.

Trapdoor

Just FYI, Canada Life have issued an annuities notice to say fixed term annuity rates have been reduced. My quote has reduced by £3k pa for a 5 year term. I’m pushing my IFA to get the forms in with the original quote which is valid for 2 weeks at the old rate but expires early next week 😳

Pat38493

I'm wondering if it's a valid strategy if I want to bridge say a 10 year gap between retirement and SP, to use a combination of fixed term annuity and drawdown.

Will this reduce the risk of worst case SORR scenarios is what I'm pondering?

I had intended to use my DB pension early for this, but if annuity rates are good this might be a strategy to avoid taking the DB earlier (or at least partially avoid it).