My Annuity Purchase

Secret2ndAccount

I have just purchased an annuity. I thought I would post the story in case it helps anyone considering one for themselves.

I am 60 and retired. I have a good sized diversified portfolio, sufficient to provide for my needs and reasonable wants for the rest of my life. So I took a look at some of the things that could threaten this comfortable position. Here’s the list:

1.    Multiple years of high inflation;
2.    Sustained poor stock market performance;
3.    Living much longer than expected.

It occurred to me that an index linked annuity would be a solution to all three of the above, so I am well into the process of purchasing an annuity.

I have a large amount of cash in savings accounts and am paying tax on the interest. Therefore, my ideal choice would have been a Purchased Life Annuity, but this turned out to be a non starter. Firstly, no-one would quote for an RPI linked product. I could get 3% escalation, but that really didn’t fit with my reasons for buying. The rate offered wasn’t great either. It would be taxed at about 8%, but would only produce the same take-home as a product purchased from the SIPP, and taxed at 20%

So I began a search for a lifetime, uncapped RPI linked single life annuity with no guarantee period, using 133k from my SIPP, i.e. 100k for the annuity.  I contacted 8 IFA’s. One said no thanks. 6 never replied. The 8th did reply, but was so slow in responding at every stage, even when prompted, that they ruled themselves out. I also used several online quoting systems and enquired with a few brokers. One agent called me in response, but refused to sell me an index linked annuity because the starting payout was much less than a level annuity! I have no words.

Hargreaves Lansdown was a useful quoting system and offered a decent rate. Within a day or two of contacting Retirementline I got a nice shiny brochure, but it only quoted for a level annuity. I called the guy and we walked through an RPI annuity. Essentially he generated exactly the same quotes as H-L, but he discounted his commission by a few hundred to make the return slightly better. So I went with Retirementline. My 100k got me 4736 PA index linked. I have some minor health/lifestyle issues, so I think it’s a slightly enhanced amount.

Progress so far has been pretty swift. I received the forms next day, returned them same day, and received an acknowledgement next day. Within less than a week, Interactive Investor called me to ask which assets I wanted to sell. We sorted that over the phone with no extra charges vs dealing online. One week later, the assets were sold, and today (pretty much as soon as the money has cleared)  I am told it is on its way to Scottish Widows. Their paperwork says that they will start owing me payments as soon as they receive the money, so hopefully it doesn’t matter too much how long they take to go through their process.   We are at 3 weeks from the telephone quote to the money heading to Scottish Widows. I have another 3 weeks before the quote expires so not worrying yet.

I will receive 33k in cash that I would rather was still in the pension, but that’s life. Plan for that is to buy gilts, maybe TG31. I still have 600k in tax shelters and that is now 100% in equities. I will keep feeding in cash each year as rules permit. So I have the option to buy another annuity or two if rates were to become really attractive when I am a bit older. That’s not necessarily the plan though. I have full SP, a DB of similar size to SP, though capped at 3%/4% once in payment, and now this annuity. So that’s >25k guaranteed income. Keeping the rest flexible seems an equally good idea right now.

DRS1

Interesting.  Things seem to be moving more quickly for you with Retirement Line than they did for me last year - 7 weeks went by with nothing happening until I phoned to chase.  Quote end May annuity start date end August.

The amount you are using for the annuity is interesting.  I had an email today from Scottish Widows which included the following sentences

"The minimum purchase price for our IFA Quotation Service (IQS) is £200k.  We are unable to action any quote requests under the value of £200k."

Maybe that explains why none of the IFAs were interested if they knew you were going to be under that minimum.

hotncold47

My experience is the same as yours, even the amount you have used and RPI. My age is 72 and the commision was also reduced so maybe this is sales pitch? Amount recieved £6500 pa.

Brie

what's the link between HL and Retirement line?

Brie

DRS1 said:

Interesting.  Things seem to be moving more quickly for you with Retirement Line than they did for me last year - 7 weeks went by with nothing happening until I phoned to chase.  Quote end May annuity start date end August.

The amount you are using for the annuity is interesting.  I had an email today from Scottish Widows which included the following sentences

"The minimum purchase price for our IFA Quotation Service (IQS) is £200k.  We are unable to action any quote requests under the value of £200k."

Maybe that explains why none of the IFAs were interested if they knew you were going to be under that minimum.

Yes that makes sense unless these people don't realise that sometimes people have more money than they might be looking at investing right at that moment.  I think that IFAs won't deal with me as I'm talking to them about my £130k DC pension that needs to be moved in order for me to get any payout.  They don't know what other money I might have in any number of other accounts.  

And good manners would say a polite "no thanks" would be nice.  They could have a pre written email ready to go and it wouldn't take them more than 2 seconds.

dunstonh

Maybe that explains why none of the IFAs were interested if they knew you were going to be under that minimum.

SW will take annuities for less than that.   Indeed, I did one with SW in the last few weeks that was about £90k net of TFC.   

I suspect that failure reason was linked to a particular broker/intermediary quotation service (or maybe SW themselves if they offer a distribution channel).

DRS1

dunstonh said:

Maybe that explains why none of the IFAs were interested if they knew you were going to be under that minimum.

SW will take annuities for less than that.   Indeed, I did one with SW in the last few weeks that was about £90k net of TFC.   

I suspect that failure reason was linked to a particular broker/intermediary quotation service (or maybe SW themselves if they offer a distribution channel).

Yes it looks like it is connected to their IFA Quotation Service but it did seem odd that the OP could buy an SW annuity with £100k via Retirement Line when there was a £200k minimum for IFAs who wanted to use SW's IFA Quotation Service.  An uneven playing field.  But if you don't have that £200k minimum then maybe not all IFAs have to use that service?  Also I have no idea if other annuity providers have a similar minimum level for their quotation systems.

DRS1

Brie said:

DRS1 said:

Interesting.  Things seem to be moving more quickly for you with Retirement Line than they did for me last year - 7 weeks went by with nothing happening until I phoned to chase.  Quote end May annuity start date end August.

The amount you are using for the annuity is interesting.  I had an email today from Scottish Widows which included the following sentences

"The minimum purchase price for our IFA Quotation Service (IQS) is £200k.  We are unable to action any quote requests under the value of £200k."

Maybe that explains why none of the IFAs were interested if they knew you were going to be under that minimum.

Yes that makes sense unless these people don't realise that sometimes people have more money than they might be looking at investing right at that moment.  I think that IFAs won't deal with me as I'm talking to them about my £130k DC pension that needs to be moved in order for me to get any payout.  They don't know what other money I might have in any number of other accounts.  

And good manners would say a polite "no thanks" would be nice.  They could have a pre written email ready to go and it wouldn't take them more than 2 seconds.

They may think you won't need them for that other money, though.

And not replying does seem to be the modern way.  I believe it is known as ghosting.

DRS1

Brie said:

what's the link between HL and Retirement line?

Not sure there is one.  They just happen to be two of the more popular outfits for buying an annuity.

dunstonh

Yes it looks like it is connected to their IFA Quotation Service but it did seem odd that the OP could buy an SW annuity with £100k via Retirement Line when there was a £200k minimum for IFAs who wanted to use SW's IFA Quotation Service.

I reckon it's via a particular method.   Most IFAs will use Exchange, Assureweb or AMS for their quotes (which have the standard product terms - minimum of £10k in the case of SW)  but the SW website indicates several other services that offer referral services that IFAs can pass the person over to and they handle the process and share the commission.  Maybe that method has a minimum?

ali_bear

Secret2ndAccount said:

I have just purchased an annuity. I thought I would post the story in case it helps anyone considering one for themselves.

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Thanks for sharing, OP.