Annuity options - pros and cons?

JSmith321

I've decided to buy an annuity with a sum of £300k and received several quotes for various options.
1. Lifetime single life level enhanced annuity with no guarantee period taking 25% tax free lump sum £16k per year (intending to move the lump sum into ISA's over the next few years)
2. Fixed term 5 years single life with guaranteed maturity amount £215k, £11k per year
The second option seems like a savings account paying interest while retaining the original capital for future investment.
Most seem to suggest that I should take the 25% lump sum and not include it in the annuity.
Any views on the pros and cons of this.
As an aside, I found the Pensionwise interview disappointing. Someone reading from a script with a very thick hard to understand foreign accent covering what I had already read.

wjr4

With that amount of money, seek advice from an independent financial adviser. 

MK62

Option 2 seems expensive........give them £300k today, and they'll give you £11k pa for 5 years and then once the five years are up, they'll give you back £215k......you'd do better just putting the £300k in a 5 yr savings ladder........or a money market fund if the 300k is in a pension
As for the tax free cash.......if you don't take it you may end up paying tax on the annuity income generated from it......so the general advice is to take the tax free cash.

Marcon

JSmith321 said:

I've decided to buy an annuity with a sum of £300k and received several quotes for various options.
1. Lifetime single life level enhanced annuity with no guarantee period taking 25% tax free lump sum £16k per year (intending to move the lump sum into ISA's over the next few years)
2. Fixed term 5 years single life with guaranteed maturity amount £215k, £11k per year
The second option seems like a savings account paying interest while retaining the original capital for future investment.
Most seem to suggest that I should take the 25% lump sum and not include it in the annuity.
Any views on the pros and cons of this.
As an aside, I found the Pensionwise interview disappointing. Someone reading from a script with a very thick hard to understand foreign accent covering what I had already read.

Sounds as if you might have been expecting them to give you financial advice, which they expressly don't do. Have you given feedback to them on the problems you had understanding the accent?

DIYPhil

Is your £300k before or after you have taken the 25% TFLS?

Sounds like before, so you will be taking £75k TFLS?

dunstonh

I've decided to buy an annuity with a sum of £300k and received several quotes for various options.

What does your IFA recommend?  (assuming you are using one as that is nearly always the best way to get quotes - especially on a pot that size - comparison sites lower the annuity rate by commission taken and have no upper limit.  An IFA fee less than the commission (such as a capped fee or fixed fee) would reduce the annuity rate far less.  Plus, if you have health issues, IFAs tend to get better outcomes due to quality of data input)

Most seem to suggest that I should take the 25% lump sum and not include it in the annuity.

There are only a small number of scenarios where not taking some or all of the 25% is the best option.

As an aside, I found the Pensionwise interview disappointing. Someone reading from a script with a very thick hard to understand foreign accent covering what I had already read.

Pensionwise is meant to cater for simple scenarios in a generic nature.  it takes no account of commercial issues or niche options and does not provide advice.   Did you expect them to give you advice?  (a common misconception)

JSmith321

DIYPhil said:

Is your £300k before or after you have taken the 25% TFLS?

Sounds like before, so you will be taking £75k TFLS?

Yes before, with £75k TFLS