Annuity choice

af1963

If you still have the full 25% tax free lump sum available ( haven't already taken some tax free cash), then taking 25% as tax free cash is probably a better deal. 

Even if you bought *another annuity* with the tax free cash, part of that additional annuity would be treated as a return of your initial investment, and not subject to income tax.  ( Because it was bought with money that isn't due to be taxed further.)  

Although with state pension and annuity income guaranteed, you have a bit more leeway to keep some exposure to shares etc.

Or you could stick it in a safe investment till you need it, if you're truly uncomfortable with leaving anything invested in shares ( e.g. cash ISA accounts - £20k each for you and your wife, this year and next, and you have sheltered £80k -  or gilts that you'll hold till they mature.) 

DRS1

mlv-1967 said:

DRS1 said:

I think I agree with the comments about taking a bigger lump sum.  Yes it would take some years to get the extra £100k into an ISA but if you are married then £40k pa would be available.  Or if you are going to follow the suggestion about using it as a state pension replacement up to SPA then you could put it in a gilt ladder which could get you negligible tax even outside an ISA (if you pick low coupon gilts)

If it is a single life annuity and you are married then presumably you have considered having a guarantee period (which can be up to 30 years) or value protection.  May be cheaper than a joint life annuity?

I looked at a guarantee period, but I want to make sure my wife is protected after my death.  A guarantee has limits and 30 years would be very expensive.

Sorry I did not realise it was joint - a good rate considering you are both relatively young for an annuity.

dunstonh

I did some quotes and the 1.4% charge is lower than many others. I did loads of comparisons. Even if you go directly to the pension company, what you get is less.  I compare the Moneyhelper quotations with the broker, and the latter was much better. 

IFA would still be better as you get the nil commission annuity rate and not the commission reduced annuity rate you are getting.

Has the broker compared different guarantee periods?   There is often a sweet spot where a certain annuity provider with x years guarantee will pay a higher annuity than the best with no guarantee period.   

mlv-1967

I have been in touch with an IFA through Pense, and the initial online quote does seem to be a little better than the broker's one. Difference of around £1,000 a year, which is significant enough.  If this is confirmed, I will contact the broker and cancel the annuity application.  I sent over the signed papers yesterday so hopefully I am still in time.

mlv-1967

I've just my new quotes from Pense (non-advisory IFA) and they charge less than Retirementline, around £4k, but they have produced worse quotations!  So I will stick with Retirementline.

DRS1

RL will get a new quote when your paperwork goes in to the provider (to extend the window for the quote as much as possible - that is the period for your pension provider to transfer the funds to the annuity provider).  It would be interesting to know if the new quote is better or worse than the first one.

dunstonh

mlv-1967 said:

I've just my new quotes from Pense (non-advisory IFA) and they charge less than Retirementline, around £4k, but they have produced worse quotations!  So I will stick with Retirementline.

Possible input issue?   Lower fees should equate to a better rate, all other things being equal.

Is the RL quote a guaranteed quote or a quick quote?  (Some sites that run quick quotes, including RL, only give two outcomes on the quick quote.  Standard rates or maximum enhanced rate.  It is only when they later input the actual data that you usually sit between the two)  

mlv-1967

dunstonh said:

mlv-1967 said:

I've just my new quotes from Pense (non-advisory IFA) and they charge less than Retirementline, around £4k, but they have produced worse quotations!  So I will stick with Retirementline.

Possible input issue?   Lower fees should equate to a better rate, all other things being equal.

Is the RL quote a guaranteed quote or a quick quote?  (Some sites that run quick quotes, including RL, only give two outcomes on the quick quote.  Standard rates or maximum enhanced rate.  It is only when they later input the actual data that you usually sit between the two)  

The RL quote is a formal, guaranteed one. What has happened is that rates changed in between the two quotes, so that caused the Pense quote to be lower.  In any case, even after this I obtained a new quote from RL just to check and the difference, and it was modest, around £300 a year.  I am proceeding with the RL quote because it was obtained before the rates changed and is valid until 1 June, then valid for another month when received by Just Retirement.

mlv-1967

DRS1 said:

RL will get a new quote when your paperwork goes in to the provider (to extend the window for the quote as much as possible - that is the period for your pension provider to transfer the funds to the annuity provider).  It would be interesting to know if the new quote is better or worse than the first one.

The original quote was based on the current amount of funds I have. When Just Retirement start to transfer funds they will ascertain the exact amount, which will likely be higher, as my funds are now in the money market instead of stocks. On that basis they will revisit the original quote and modify it to take account of the new fund additions. 
I believe this is the process.

Triumph13

I have to agree with the others on the tax free lump sum.  Using it to buy income that will be taxed at 40% is very public spirited of you, but definitely sub-optimal.