Purchased Annuity v SIPP

njb1960

I am looking to use £100,000 inheritance for retirement and was looking at Purchased life annuities. However, I am totally confused as I was told I need to pay for a financial advisor before I can even look at buying one. Are these worth it as I understand you are guaranteed income for the rest of your life? I have also considered SIPP which I know more about, but am worried the funds will run out at some point. Any help would be appreciated!

dunstonh

 However, I am totally confused as I was told I need to pay for a financial advisor before I can even look at buying one.

I don't belive the PLA providers retail direct to consumer.

 Are these worth it as I understand you are guaranteed income for the rest of your life?

In the right circumstances, yes.  In the wrong ones, no.
With annuity rates high, they are currently offering good value.   However, most of the last 17 years, they were not good value.

 I have also considered SIPP which I know more about, but am worried the funds will run out at some point.

You could consider a lifetime annuity with a pension fund.  Similar to a purchased life annuity, although taxation is not as favourable, but a pension fund already built up, you would use a lifetime annuity instead of a purchased life annuity.

DRS1

A good thing about purchased life annuities is that they recognise that part of the annual payment is actually you getting your own money back.  So you are not charged income tax on all of the annual payment.

If you use some of your SIPP funds to buy a pension annuity then all the annual payments under the annuity are subject to income tax

By the way it may not be quick getting the £100k into your SIPP.  Very much depends on what income you have from employment or self employment.

Have you thought about where else to put it?  A gilt ladder might mimic an annuity but I am not sure how long it would last

Albermarle

The large majority of annuities are bought with funds from a pension pot.
Buying an annuity with other money is a niche product and only restricted availability.

 I have also considered SIPP which I know more about, 

Can you clarify what you mean by that? Do you have a pension pot/SIPP ?

ps - No need to post in Bold type.

njb1960

hAlbermarle said:

The large majority of annuities are bought with funds from a pension pot.
Buying an annuity with other money is a niche product and only restricted availability.

 I have also considered SIPP which I know more about, 

Can you clarify what you mean by that? Do you have a pension pot/SIPP ?

ps - No need to post in Bold type.

Yes . I have a small drawdown account

Albermarle

njb1960 said:

hAlbermarle said:

The large majority of annuities are bought with funds from a pension pot.
Buying an annuity with other money is a niche product and only restricted availability.

 I have also considered SIPP which I know more about, 

Can you clarify what you mean by that? Do you have a pension pot/SIPP ?

ps - No need to post in Bold type.

Yes . I have a small drawdown account

You can not just add the £100K to that account, ( in case that is what you are thinking)
You are limited by how much your employment earnings are in the tax year.

LHW99

Albermarle said:

njb1960 said:

hAlbermarle said:

The large majority of annuities are bought with funds from a pension pot.
Buying an annuity with other money is a niche product and only restricted availability.

 I have also considered SIPP which I know more about, 

Can you clarify what you mean by that? Do you have a pension pot/SIPP ?

ps - No need to post in Bold type.

Yes . I have a small drawdown account

You can not just add the £100K to that account, ( in case that is what you are thinking)
You are limited by how much your employment earnings are in the tax year.

Do you actually mean it is in drawdown now?

If you have taken any taxable money out already, you will be limited by the MPAA of £10k pa, or your employment earnings if greater.

DRS1

LHW99 said:

Albermarle said:

njb1960 said:

hAlbermarle said:

The large majority of annuities are bought with funds from a pension pot.
Buying an annuity with other money is a niche product and only restricted availability.

 I have also considered SIPP which I know more about, 

Can you clarify what you mean by that? Do you have a pension pot/SIPP ?

ps - No need to post in Bold type.

Yes . I have a small drawdown account

You can not just add the £100K to that account, ( in case that is what you are thinking)
You are limited by how much your employment earnings are in the tax year.

Do you actually mean it is in drawdown now?

If you have taken any taxable money out already, you will be limited by the MPAA of £10k pa, or your employment earnings if greater.

Lower (not greater?)