Annuity

snowlaser

An annuity provides a secure income with your chosen level of pension increases for the rest of your life.  The main downsides really are:
- You may not live very long (although you can set it up with a guarantee period and spouse's pensions which will pay out after your death)
- The cost of them is fixed at purchase ... if investment returns are really good, or annuity rates improve over time, you won't benefit (but equally if investment returns are poor, or annuity rates worsen, you're not affected)
- You can't leave any of your pension fund to children (but then is that what it's for?  you may have other things to leave to them like a house etc)
- The pattern of income it provides may not suit you as much as drawdown (for example, you might want to access more money earlier in your retirement when you are healthier - but the 25% PCLS may allow that anyway)

hotncold47

After seeing a few Annuity related threads recently here I was interested enough to look on moneyhelper and other sites for more info. It's left me unclear as to if you always have to take 25% TFLS ie. use £100000, £25000TFLS then £75000 for the annuity? This obviously reduces the amount you might be quoted, the Moneyhelper calculator doesn't seem to include anything about the TFLS? If the TFLS had already been used only Crystalised funds would be used?

As someone who seems to permanently be in a state of analysis paralysis one of the attractions of annuities seems to be replaced with what to do with the TFLS with reducing interest rates and possible less positive markets, depending on where get your news.

I am not thinking of using my whole pot just enough to generate base income combined with SP, as someone with no dependants, no mortgage, at 72 an annuity index linked might have attractions.

TIA.

flaneurs_lobster

westv said:

flaneurs_lobster said:

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Good for you.

Other people's circumstances are, of course, myriad and may not include a spouse.

Wel that's obvious and it was also obvious I was only talking about a situation where there is a spouse.

Your response was couched in the first person and therefore addressed only your own situation. There are certainly situations where one is espoused but with good reason why spousal benefits might not be appropriate (eg where each party has their own annuity).

arthur_fowler

hotncold47 said:

After seeing a few Annuity related threads recently here I was interested enough to look on moneyhelper and other sites for more info. It's left me unclear as to if you always have to take 25% TFLS ie. use £100000, £25000TFLS then £75000 for the annuity? This obviously reduces the amount you might be quoted, the Moneyhelper calculator doesn't seem to include anything about the TFLS? If the TFLS had already been used only Crystalised funds would be used?

As someone who seems to permanently be in a state of analysis paralysis one of the attractions of annuities seems to be replaced with what to do with the TFLS with reducing interest rates and possible less positive markets, depending on where get your news.

I am not thinking of using my whole pot just enough to generate base income combined with SP, as someone with no dependants, no mortgage, at 72 an annuity index linked might have attractions.

TIA.

The moneyhelper website says: How much money will you use from your pension pot(s) to buy this income?

So if you plan to take aTFLS you need to subtract that amount before entering the value into the field.

westv

flaneurs_lobster said:

westv said:

flaneurs_lobster said:

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Good for you.

Other people's circumstances are, of course, myriad and may not include a spouse.

Wel that's obvious and it was also obvious I was only talking about a situation where there is a spouse.

Your response was couched in the first person and therefore addressed only your own situation. There are certainly situations where one is espoused but with good reason why spousal benefits might not be appropriate (eg where each party has their own annuity).

I'm not sure the point of your post. Anyway, moving on to mors important things.

dunstonh

After seeing a few Annuity related threads recently here I was interested enough to look on moneyhelper and other sites for more info. It's left me unclear as to if you always have to take 25% TFLS ie. use £100000, £25000TFLS then £75000 for the annuity? This obviously reduces the amount you might be quoted, the Moneyhelper calculator doesn't seem to include anything about the TFLS? If the TFLS had already been used only Crystalised funds would be used?

Lifetime Annuities are taxed as income.  So, using 25% TFC to provide a taxable income is not efficient.   If you really wanted to use the 25% for a secure income you would buy a Purchased Life annuity.    Or use the 25% for flexible income (such as in an ISA or annual bed & pension)

kinger101

flaneurs_lobster said:

westv said:

flaneurs_lobster said:

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Good for you.

Other people's circumstances are, of course, myriad and may not include a spouse.

Wel that's obvious and it was also obvious I was only talking about a situation where there is a spouse.

Your response was couched in the first person and therefore addressed only your own situation. There are certainly situations where one is espoused but with good reason why spousal benefits might not be appropriate (eg where each party has their own annuity).

Joint annuities can be  highly appropriate in circumstances where each partner buys one.

(A) The financial requirements of a single person is usually more than half of the couple.
(B) You might move from 2 full state pensions (or less) to 1.
(C) Not all DB pension schemes pay 50% spousal benefit either.

Just don't see the point in shooting down a valid comment.  I've learnt a lot from this forum because of the diversity of opinions and perspectives.

flaneurs_lobster

kinger101 said:

Just don't see the point in shooting down a valid comment.  I've learnt a lot from this forum because of the diversity of opinions and perspectives.

I take your point, apologies if my comment was taken as rude.

Was just trying to make the point that comments citing personal opinion without explanation are not really of much help to a general audience.

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Why would this not be considered?

What other methods of making provision for a bereaved spouse have been considered or are already in place?

And so on..

ukdw

DullGreyGuy said:

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Which is fine, but having dealt with bulk annuities in the past, where the annuity can be set to be spouse at time of retirement rather than death, there have been some very angry people that their ex-wife/husband will be getting their pension on their passing, especially those with a new spouse. 

Is  'spouse at time of retirement' every available for individual annuity purchases? Because if so it could have some interesting tax advantages if the spouse has plenty of tax free or 20% tax band available.

HappyHarry

ukdw said:

DullGreyGuy said:

westv said:

I have a spouse and would never consider an annuity purchase without benefits for her.

Which is fine, but having dealt with bulk annuities in the past, where the annuity can be set to be spouse at time of retirement rather than death, there have been some very angry people that their ex-wife/husband will be getting their pension on their passing, especially those with a new spouse. 

Is  'spouse at time of retirement' ever available for individual annuity purchases? Because if so it could have some interesting tax advantages if the spouse has plenty of tax free or 20% tax band available.

Individual Annuities are written on named people - not unnamed as many DB pension schemes cater for.