£100,000 Pot taken as drawdown.

incus432

Mine was from AJ Bell to L&G and both used the Origo system

incus432

James Shack covers fixed term annuities well in this video with an example. From about 8min15 on

And he's right - there is a lot of hate for annuities out there alongside some very outdated advice and received 'wisdom'.

https://www.youtube.com/watch?v=M-03sb8DvFo&t=366s

Bravepants

incus432 said:

Bravepants said:

The OP's not going to find annuity that pays 16%+ a year income.

We are talking about a fixed term annuity. Most of the income is return of the principal sum so a FT annuity pays out well over the sum invested over the term.  

Quick check on Money Helper shows £75000 (after the £25k TFLS) buys £16500 pa for 5* years with Canada Life (depending on postcode, guarantee period, etc). The 25k lump sum could be used as income at another 5k pa (plus interest)

* site does not let me choose 6yr term but a broker would

OK cool, I didn't reliase one could do this. 

But the annuity option just provides a hedge against reducing interest rates right? You can currently get better rates in a Short Term Money Market fund (4.7%). The example you give there seems to suggest an average annual interest rate closer to 3% over the period. So the purchaser would be better off with the annuity only if the SONIA rate falls a couple of percent below the current value. 

incus432

The return is roughly the same as you would get from a gilt ladder (but without the hassle of setting it up and the uncertainty of changes in SIPP fees, interest rates etc). Yes you are choosing certainty of income over the possibility you could do better if you left it in MMF to draw it out. You would have more selling fees then though.