Considering annuities

Cressida100

@DullGreyGuy Thanks for the response. Medication for my RA is rituximab a B-cell inhibitor. Taking along with methotrexate. I will have another go at the forms to see if I have misread the questions. 

dunroving

Mr_Benn said:

Just a heads up Brie, if you just need some impartial explanation of Terms or what something means, you can contact moneyhelper.org.  Theyre a government run team. They cant offer advice as such, but are good at just answering the question you ask without trying to sell you something. You can even arrange a 1 hour session with them. 

https://www.moneyhelper.org.uk/

Money Helper also has an annuity calculator. It's very basic but at least would allow you to manipulate some scenarios to see what effect various factors might have on the amount. The best part of the Money helper site is that you won't be chased up afterwards by someone trying to sell you something.

There are also annuity brokers who will give you quotes based on various options. Retirement Line is one. They might follow up with phone calls, but they won't constantly pester you. They are a "no advice" option though, so you really need to educate yourself on the various options. 

Personally, for a life annuity it would really annoy me to think of the annuity company being quids-in if I died early in the annuity period. There are various options open to provide some sort of guarantee (a guarantee period, an annuity that would pay a dependent after you die, etc.). Obviously when we are dead we won't care what happens, but there is something about being frugal and responsible that means we don't want our hard-earned money to disappear in a puff of smoke if we die early in the annuity period - so, it gives you peace of mind while you are alive, so to speak. 

TBH, an afternoon spent on a thorough Google search into annuities would be helpful, otherwise you are dependent on piecemeal information from this thread. YouTube has several decent videos. Just search for annuity in YouTube and then restrict to recent dates to get up to date information. 

TheTelltaleChart

dunstonh said:

AND if I didn't take a TFLS would my eventual monthly payments be partially tax free.

In most annuities no. Although there are some options available to IFAs that can do this.

I'm interested in this …

Does using this option limit the range/rates of annuities available, or can an IFA get this applied to all the annuities on the market?

Is there a specific name for this option?

DullGreyGuy

Cressida100 said:

@DullGreyGuy Thanks for the response. Medication for my RA is rituximab a B-cell inhibitor. Taking along with methotrexate. I will have another go at the forms to see if I have misread the questions. 

Looking at Hargreaves Lansdown website you can add arthritis as a condition and specify rituximab as the medication taken

Cressida100

DullGreyGuy said:

Cressida100 said:

@DullGreyGuy Thanks for the response. Medication for my RA is rituximab a B-cell inhibitor. Taking along with methotrexate. I will have another go at the forms to see if I have misread the questions. 

Looking at Hargreaves Lansdown website you can add arthritis as a condition and specify rituximab as the medication taken

Thanks I just need to find out dose. 

dunstonh

Does using this option limit the range/rates of annuities available, or can an IFA get this applied to all the annuities on the market?

It was a particular provider but its growing with other platforms but still very limited in avaiability.

Effectively, you buy the annuity with cash in the pension and the income remains in the pension and is paid to the cash account of the pension (you can then leave it there or buy more units of investments etc).  You then access the pension flexibly by drawing against the cash account your chosen amount and chosen method.

At the moment, the annuity provider offering it and the platforms it is on are not great.   (i.e. at the lower end on the annuity rate and the more expensive platforms).

Hoenir

dunroving said:

Personally, for a life annuity it would really annoy me to think of the annuity company being quids-in if I died early in the annuity period. 

The pooled risk enhances the return for those that live on.  Cake and eat it. Alternatively buy shares in the annuity providers thmselves. 

More people spend their lifetimes insuring their property against the risk of fire. 

DullGreyGuy

dunroving said:
Personally, for a life annuity it would really annoy me to think of the annuity company being quids-in if I died early in the annuity period. There are various options open to provide some sort of guarantee (a guarantee period, an annuity that would pay a dependent after you die, etc.). Obviously when we are dead we won't care what happens, but there is something about being frugal and responsible that means we don't want our hard-earned money to disappear in a puff of smoke if we die early in the annuity period - so, it gives you peace of mind while you are alive, so to speak. 

You are misunderstanding how the common pool works 

You insure 100 people all with an expected life expectancy of reaching 78, you will be paying them all equally. If by a miracle all of them survived to age 78 you have in principle run out of money to pay them were it not for risk margins and requirements for capital to be way above the best estimate of liability. Wouldnt require them all to live more than a few of years to have consumed all the monies paid and investments on them.

Thankfully the reality is that some will die early and some will die late, those that die younger than anticipated dont result in a big party on the left over money but is used to pay the person that lives to 110 despite being a 40 a day smoker. 

Guarantees are ok but obviously reduce the payment you get whilst you are alive and it doesnt answer the question of what happens to your spouse if they live to 110 and so way beyond the end of the guarantee. Plenty buy a guarantee assuming their partner will outlive them but then when the spouse dies first its wasted money. 

Having dealt with buyouts too, there are a lot of calls from people who call to say they've divorced their wife or have just got remarried but the scheme rules was that the second life pension is paid to the spouse at date of retirement so their ex-wife/husband gets their pension on their passing rather than their new spouse which pisses many more people off than the fact the annuity has no value on their death.

dunroving

Hoenir said:

dunroving said:

Personally, for a life annuity it would really annoy me to think of the annuity company being quids-in if I died early in the annuity period. 

The pooled risk enhances the return for those that live on.  Cake and eat it. Alternatively buy shares in the annuity providers thmselves. 

More people spend their lifetimes insuring their property against the risk of fire. 

I understand it is ostensibly a form of insurance, and the concept of pooled risk. The add-on of a guaranteed period is also a form of insurance or risk mitigation - so clearly the insurance companies recognise the concern of some potential customers of dropping dead within months of an annuity starting.

Some risk factors such as genetics are not taken into account by annuity companies, and for such people the guarantee period helps to offset this concern.

dunroving

DullGreyGuy said:

dunroving said:
Personally, for a life annuity it would really annoy me to think of the annuity company being quids-in if I died early in the annuity period. There are various options open to provide some sort of guarantee (a guarantee period, an annuity that would pay a dependent after you die, etc.). Obviously when we are dead we won't care what happens, but there is something about being frugal and responsible that means we don't want our hard-earned money to disappear in a puff of smoke if we die early in the annuity period - so, it gives you peace of mind while you are alive, so to speak. 

You are misunderstanding how the common pool works 

You insure 100 people all with an expected life expectancy of reaching 78, you will be paying them all equally. If by a miracle all of them survived to age 78 you have in principle run out of money to pay them were it not for risk margins and requirements for capital to be way above the best estimate of liability. Wouldnt require them all to live more than a few of years to have consumed all the monies paid and investments on them.

Thankfully the reality is that some will die early and some will die late, those that die younger than anticipated dont result in a big party on the left over money but is used to pay the person that lives to 110 despite being a 40 a day smoker. 

Guarantees are ok but obviously reduce the payment you get whilst you are alive and it doesnt answer the question of what happens to your spouse if they live to 110 and so way beyond the end of the guarantee. Plenty buy a guarantee assuming their partner will outlive them but then when the spouse dies first its wasted money. 

Having dealt with buyouts too, there are a lot of calls from people who call to say they've divorced their wife or have just got remarried but the scheme rules was that the second life pension is paid to the spouse at date of retirement so their ex-wife/husband gets their pension on their passing rather than their new spouse which pisses many more people off than the fact the annuity has no value on their death.

I'm not misunderstanding how the common pool works at all. Annuity companies recognise the concern I expressed, and now offer annuities with guarantee periods - which is itself another form of insurance.