Fixed term annuity

flaneurs_lobster

Trapdoor said:

Just FYI, Canada Life have issued an annuities notice to say fixed term annuity rates have been reduced.

This makes me nervous. Having seen my DC pension pot flatline for the last three years I was consoling myself with the fact that the annuity rates have never been higher (I'm waiting on a funds transfer before finalising quote requests).

Is a perfect sh1tstorm about to come to a head for anyone looking to take DC pension benefits about now?

GSP

Trapdoor said:

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 😳

Thanks, and best of luck processing this in time.

I’m meeting my IFA tomorrow and this product will form part of the meeting. I’m expecting him to run some figures for us, so can ask about this change.

The inflation rate is on Tuesday 17th October, and expect it will have a large bearing on what the BoE do at their next decision on 2nd November. 

Donewithwork1

Trapdoor said:

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 😳

Interesting!  I'm in a similar position.  I had a quote a week ago through an IFA and said I'd like to think about it so they scheduled a call for today.  This call took place and they ran another quote and the guaranteed maturity value has fallen by £9,091.00 in a week!!  

Last week:  Pension pot £348,750 (after taking 25% PCLS).... 5 year term..... annual income £12,570 pa fixed..... paid monthly in advance.....  guaranteed maturity value at end of term £386,871.00

This week:  Same figures as above but guaranteed maturity value at end of term reduced to £377,780.00

They are calling again tomorrow and I'm going to ask them why the first quote (which is supposedly valid for 14 days) is now not being used!!

Trapdoor

Well, it’s definitely gone down.

I have run a few scenarios on the Moneyhelper annuity tool and it’s quite a significant drop, which if my IFA doesn’t get the signed forms in pronto will ‘cost me’ 😡

Frustrating really as I’ve been trying to chivvy them along for weeks now and everything seems to run at a snails pace … the lack of action could significantly impact my income for the next 5 years and no doubt the FAs on here will just cite that as ‘luck of the draw’.

Donewithwork1

Trapdoor said:

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 😳

Trapdoor, out of interest, do you know what fee you are being charged if going ahead?  The firm quoting me would charge 1.68% which for my pot is a fee of £5,859   

Do you have a link to Canada life's notice that you refer to please?

DT2001

Pat38493 said:

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).

I think it is a valid strategy. You could have two fixed term annuities, one geared to SPA and the other to the NRA of your DB pension (if that is different). The downside is limited to any inflation ravaging of your pot. When you reach SPA what role does your pot play - is it just the difference between comfortable and luxury retirement, an IHT free fund to be passed on or vital to cover day to day expenditure?

Pat38493

DT2001 said:

Pat38493 said:

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).

I think it is a valid strategy. You could have two fixed term annuities, one geared to SPA and the other to the NRA of your DB pension (if that is different). The downside is limited to any inflation ravaging of your pot. When you reach SPA what role does your pot play - is it just the difference between comfortable and luxury retirement, an IHT free fund to be passed on or vital to cover day to day expenditure?

Yes - this is kind of what I was thinking but I am not sure how you would model where the sweet spot would be.  I haven't seen any tools in the available software to help with this type of thing.  I guess that in any case it would depend on current annuity rates which change all the time.

Trapdoor

Donewithwork1 said:

Trapdoor said:

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 😳

Trapdoor, out of interest, do you know what fee you are being charged if going ahead?  The firm quoting me would charge 1.68% which for my pot is a fee of £5,859   

Do you have a link to Canada life's notice that you refer to please?

My fee structure is complicated … for various reasons … and it would not be prudent to quote it. 1.68% does seem a lot though.

I don’t have a link as this was relayed to me by my IFA but it’s easy to run a quote and compare it to one a couple of weeks ago … which is just what I did and for the same amount used to purchase the annuity, my annual amount has dropped by just over £3k 🙁

zagfles

flaneurs_lobster said:

Trapdoor said:

Just FYI, Canada Life have issued an annuities notice to say fixed term annuity rates have been reduced.

This makes me nervous. Having seen my DC pension pot flatline for the last three years I was consoling myself with the fact that the annuity rates have never been higher (I'm waiting on a funds transfer before finalising quote requests).

Is a perfect sh1tstorm about to come to a head for anyone looking to take DC pension benefits about now?

Even if your DC pension has flatlined, gilts have plummetted over the last 3 years so annuities are far better value than they were 3 years ago. If you're looking to buy an annuity in the very near future surely you're invested in some gilt/bonds based funds or similar so they'd hedge against annuity price changes. 

zagfles

Interesting some of these fixed term annuities seem better value than simply buying a gilt or a gilt ladder from a very quick rough check. I guess there's mortality credits - if you die during the fixed term is there any payout for dependants?