Choosing annuity over draw down?

Pumpkin23

I will shortly have access to about £200k from my deceased husbands private pension plan. I can take a £50k benefit and raw down a certain amount on a monthly basis but the total funds do not increase for me.
should I take the whole lot and put it into an annuity? Also, should I split the amount up to put into a variety of annuities?
My aim is, to make the money work as best as possible, whilst I also draw a monthly amount to live of.
Any advice is greatly received, thank you.

incus432

Sorry for your loss. 

For anyone to be able to comment we would need to know things like your age, are you gettting the state pension or other pension, whether you have other guaranteed income and savings, if you have a mortgage or other debts, any children/dependents, and how much you need to live on. It may help to know who the pension plan is with.  The other important factor is how old your husband was when he died - it makes a difference if he was under or over 75.

Buying an annuity means you pay over your pension fund (after any tax free lump sum which I presume is the 50k you mention as 'benefit' - [edit - how is this available to you after death?]) and the insurer guarantees to pay you a monthly income for life  (although you can also get fixed term annuities to bridge the gap to state pension age for example).  There are lots of options like escalating amounts or flat, guarantee periods, etc.  So once you buy it you cannot change it and the money is no longer 'working' for you - it is no longer yours. 

The other option may be drawdown where the pension remains yours but you just take an income from it. I have no idea if this is possible here although you mention drawdown in the title.  Hopefully you should get your options explained to you by the pension trustees?. You may need to get proper independent advice before making any decisions.  

Mark_d

It it was me, based on current annuity rates, I'd buy an annuity with the entire amount.  I can't see any advantage you'd gain from having multiple annuities.

But you might want to consider how much money you need vs how much you want to leave for inheritance.

dunstonh

I will shortly have access to about £200k from my deceased husbands private pension plan. I can take a £50k benefit and raw down a certain amount on a monthly basis but the total funds do not increase for me.

Are you sure about that?

On death, the entitlement to 25% tax free cash ends.  However, if he died before age 75, then the whole fund is available tax free.  If he died after age 75, then none of the fund is available tax free.      

So, the standard guides for annuity, where you take 25% up front, do not apply here.   If its not an annuity but a scheme pension, then they may mirror what a standard annuity does but that doesn't mean you are limited to that as the only option.

should I take the whole lot and put it into an annuity? 

If it meets your objectives then yes.  if not then no.

 Also, should I split the amount up to put into a variety of annuities?

What would you be looking to achieve by doing that?  (typically you wouldn't but we need to know what you think the benefit will be).

There is a lot of information we don't have about your or your circumstances etc which makes it difficult to answer questions that could be suitable for some people but not others.  So, the responses are not being difficult but are limited based on what you have said.

Sorry for your loss.

Albermarle

I will shortly have access to about £200k from my deceased husbands private pension plan. I can take a £50k benefit and raw down a certain amount on a monthly basis but the total funds do not increase for me

As already mentioned, there is something a bit odd about the pension you will get following the sad loss of your husband. Apart from the 25%/£50K part, why will the total funds not increase in future? Normally they would be invested and would hopefully grow with time.
It would be better if you could supply more details, as it could be more complicated than it looks at first sight.

Pumpkin23

Thank you all. To give you more information based on questions in one of your replies:
I am 60 years old, my husband was 64 when he died. I am a housewife without income. I have no dependants. I will be in receipt of a full state pension in 7 years time. The entire private pension sum is tax free to me. It is currently invested as part of a private pension scheme through Twigdenn Asset Management after it was convertet many years back from a self admin pension plan of my husband’s and his family’s business. I am in receipt of some other money from my husband’s life insurance, which I have put into an ISA, premium bonds etc for now. Also I am in receipt of £400 PPF per month. I do not have a mortgage and I own my property.
As to money ideally required on a monthly basis, to live and pay all bills, I estimate it at £2000 at the moment.
Thank you.

Albermarle

The entire private pension sum is tax free to me

OK that makes sense but can you explain these comments.

 I can take a £50k benefit and raw down a certain amount on a monthly basis but the total funds do not increase for me.

incus432

Once you have clarified the '50k benefit' point it will be clear how much you have in the pot to potentially buy an annuity, or drawdown and what the tax position is.  You say you have a full state pension in 7 years time so you have to a) fill the income gap between now and then and b) possibly top up the SP with other income as on its own it may not be enough.  

Whether an annuity or drawdown (or other option?) is better for you depends on a number of factors.  Annuity rates are are high right now.  You can get illustrative quotes from Moneyhelper which is an official gov site, put in a guessed amount and try out different scenarios (flat or increasing payments, guarantee period etc).  Worth pointing out that if you have certain health conditions you may get a better annuity rate.

https://comparison.moneyhelper.org.uk/en/tools/annuities

Pumpkin23

I have tax free access to a £220k pension pot from my deceased husband. The pot will not grow further. I am 60, will be in receipt of the full uk state pension at 67. I am looking for options of investing some or all the pension pot in the most tax efficient way. I would have to have access to take regular drawings at some stage in the next few years.
I appreciate any advice, thank you.

incus432

Pumpkin23 said:

I have tax free access to a £220k pension pot from my deceased husband. The pot will not grow further. I am 60, will be in receipt of the full uk state pension at 67. I am looking for options of investing some or all the pension pot in the most tax efficient way. I would have to have access to take regular drawings at some stage in the next few years.
I appreciate any advice, thank you.

EDITED - I see you started another thread before and had a number of comments. Would it not be better to continue with that one?

https://forums.moneysavingexpert.com/discussion/6577459/choosing-annuity-over-draw-down#latest

Pumpkin23

I can add the contents of my new thread to the first thread, if you think that would be best.