Can I buy a deffered annuity now?

RogerPensionGuy

I've researched annuities a lot and have finnaly finnaly decided to buy one in the next few weeks and definitely getting it locked in before before the next budget.

I've decided the amount of cash I'll use from a DC SIPP to fund it and picked RPI with Value Protection VP of 75% as 75% just felt like best balanced value, I found trying to pick the protection factor the most difficult part of this process. 

I'm just over 61 a bit and I don't need the income in any rush and just seeing if I could possibly buy a deffered annuity using todays annuity rates like on moneyhelper or HL and maybe a start date middle of next year or possibly 2027.

Ive googled and googled a bit and not found the information I fully want. 

So I'm looking to buy an annuity now, locking in at todays rates, but it starts paying out 2026 or 2027. 

Any views, comments or signposting most appreciated. 

TIA Roger. 

sandsy

Individual deferred annuities generally aren't available in the UK.

OldScientist

Typically they weren't available a few years ago, e.g., see https://www.unbiased.co.uk/news/pensions-retirement/pack-your-retirement-parachute but they now appear to be mentioned on at least two insurance company websites, e.g., https://www.legalandgeneral.com/retirement/pension-annuity/guides/types-of-annuity/ (scroll down) and https://www.phoenixlife.co.uk/customer-centre/help-centre/product-guides/types-of-annuity . I suspect any change has been driven by people trying to lock in the current high annuity rates and minimise tax.

Whether the mentions mean that that actually exist for purchase is a different matter (there are, AFAIK, no sites offering example payout rates). Do any of our resident IFAs know whether they actually exist?

RogerPensionGuy

OldScientist said:

Typically they weren't available a few years ago, e.g., see https://www.unbiased.co.uk/news/pensions-retirement/pack-your-retirement-parachute but they now appear to be mentioned on at least two insurance company websites, e.g., https://www.legalandgeneral.com/retirement/pension-annuity/guides/types-of-annuity/ (scroll down) and https://www.phoenixlife.co.uk/customer-centre/help-centre/product-guides/types-of-annuity . I suspect any change has been driven by people trying to lock in the current high annuity rates and minimise tax.

Whether the mentions mean that that actually exist for purchase is a different matter (there are, AFAIK, no sites offering example payout rates). Do any of our resident IFAs know whether they actually exist?

Thanks OldScientist like always. 

Since I've been digging & digging trying to understand all the goods & bads of annuities and buying one. 

Whenever I ask organisations or people, I get a very vague feedback on deffered annuities. 

After much much lamenting I have finally decided on which increase factor and protection type to use trying to find balance in my head and hopefully keeping my emotions cool over time.

I'm just reviewing my overall situation and will decide the total amount I will use to buy an annuity, I'm seeing a local IFA next week and expect to confirm a deal on that meeting hopefully. 

It will be interesting to see if anyone here signposts an easy way to buy a deffered annuity and that maybe helpful, with the protection factor I'm picking, I would have no issue buying an annuity now to kick in next year or the year after. 

Cheers Roger. 

dunstonh

I'm just over 61 a bit and I don't need the income in any rush and just seeing if I could possibly buy a deffered annuity using todays annuity rates like on moneyhelper or HL and maybe a start date middle of next year or possibly 2027.

You could buy an annuity within a SIPP and have the income paid to the cash account in the SIPP.   Then when you are ready, you can draw from the SIPP but until then, it stays in the SIPP and you are not taxed until you start drawing from the SIPP.

So, whilst deferred annuities are not available in the mainstream, some functionality could achieve what you are after.   However, the limitation is that not all annuity providers are available within a SIPP.       Just is the main one.  So, if Just isn't coming out high enough for you, it might be better to wait until next year, even if annuity rates continue to drop.

SVaz

You can definitely buy a deferred fixed term annuity but at my age of 60 the figures/cost  didn’t look good for one starting at 62 for 5 years with 100% spouse. Plus I want varying amounts,  more for the first two years,  so would have had to go for an unsatisfactory average 

I seem to remember Canada life had the best rate on the comparison site. 

RogerPensionGuy

dunstonh said:

I'm just over 61 a bit and I don't need the income in any rush and just seeing if I could possibly buy a deffered annuity using todays annuity rates like on moneyhelper or HL and maybe a start date middle of next year or possibly 2027.

You could buy an annuity with a SIPP and have the income paid to the cash account in the SIPP.   Then when you are ready, you can draw from the SIPP but until then, it stays in the SIPP and you are not taxed until you start drawing from the SIPP.

So, whilst deferred annuities are not available in the mainstream, some functionality could achieve what you are after.   However, the limitation is that not all annuity providers are available within a SIPP.       Just is the main one.  So, if Just isn't coming out high enough for you, it might be better to wait until next year, even if annuity rates continue to drop.

Thanks dunstonh.

Great information, that system would indeed slide personal tax burden. 

I was looking for the utopian annuity for me, I wanted to buy an annuity now locking in current rate offerings for my certainty and it only starts paying our in the future and was hoping a little roll up on deal as they have all money and period before death is less.

But it sure looks like I cannot have my cake, cook it more then eat later. 

RogerPensionGuy

SVaz said:

You can definitely buy a deferred fixed term annuity but at my age of 60 the figures/cost  didn’t look good for one starting at 62 for 5 years with 100% spouse. Plus I want varying amounts,  more for the first two years,  so would have had to go for an unsatisfactory average 

I seem to remember Canada life had the best rate on the comparison site. 

Thanks SVaz. 

Good information, but I've decided to lock & load a life annuity now as rates okay and I want to just have hard cash flows to make life more simple if I grow older. 

RogerPensionGuy

dunstonh said:

I'm just over 61 a bit and I don't need the income in any rush and just seeing if I could possibly buy a deffered annuity using todays annuity rates like on moneyhelper or HL and maybe a start date middle of next year or possibly 2027.

You could buy an annuity within a SIPP and have the income paid to the cash account in the SIPP.   Then when you are ready, you can draw from the SIPP but until then, it stays in the SIPP and you are not taxed until you start drawing from the SIPP.

So, whilst deferred annuities are not available in the mainstream, some functionality could achieve what you are after.   However, the limitation is that not all annuity providers are available within a SIPP.       Just is the main one.  So, if Just isn't coming out high enough for you, it might be better to wait until next year, even if annuity rates continue to drop.

This post from dunstonh has really got me thinking. 

A great way to effectively defer an annuity capturing annuity rates today. 

My current idea is how about doing an annuity now paying in to a SIPP and just use the SIPP as a bucket and drain it as and when I require it, that would capture annuity rates today and simply drain SIPP/bucket at will.

Three questions below if anyone has a view or answer & TIA Roger. 
***

I'm wondering if I could not even drain SIPP for years in the future?

With the cash in the SIPP, could I buy units in other stuff like normal?

If I was able to do the above, am I correct that I would not trigger the MPAA until I took out my 1st penny out of that SIPP? 

DRS1

RogerPensionGuy said:

dunstonh said:

I'm just over 61 a bit and I don't need the income in any rush and just seeing if I could possibly buy a deffered annuity using todays annuity rates like on moneyhelper or HL and maybe a start date middle of next year or possibly 2027.

You could buy an annuity within a SIPP and have the income paid to the cash account in the SIPP.   Then when you are ready, you can draw from the SIPP but until then, it stays in the SIPP and you are not taxed until you start drawing from the SIPP.

So, whilst deferred annuities are not available in the mainstream, some functionality could achieve what you are after.   However, the limitation is that not all annuity providers are available within a SIPP.       Just is the main one.  So, if Just isn't coming out high enough for you, it might be better to wait until next year, even if annuity rates continue to drop.

This post from dunstonh has really got me thinking. 

A great way to effectively defer an annuity capturing annuity rates today. 

My current idea is how about doing an annuity now paying in to a SIPP and just use the SIPP as a bucket and drain it as and when I require it, that would capture annuity rates today and simply drain SIPP/bucket at will.

Three questions below if anyone has a view or answer & TIA Roger. 
***

I'm wondering if I could not even drain SIPP for years in the future?

With the cash in the SIPP, could I buy units in other stuff like normal?

If I was able to do the above, am I correct that I would not trigger the MPAA until I took out my 1st penny out of that SIPP? 

To answer the questions

1 I think you mean can you leave the cash received inside the SIPP (rather than just take it out as and when it is received) then @dunstonh is clearly suggesting you can do that.  By extension you can leave it in there for as long as you like.  There is no deadline for withdrawing it.

2 He mentions paying it into the cash account but is probably only because it will come in as cash.  I don't see why you can't invest it just like any other cash in the SIPP.

3 You will not trigger the MPAA until you take your first taxable penny out of the SIPP - so a TFLS on its own would not do that.  I am assuming that the act of buying the annuity will not have triggered the MPAA because the annuity is held within the SIPP.  Buying an annuity usually does not trigger the MPAA but I think I have seen that buying an annuity which could decrease can trigger the MPAA (See Money purchase annual allowance (MPAA) - Royal London for advisers).  Just thinking here of another concern you had about RPI linked annuities which could decrease if RPI is negative.  I am not sure if that may be a concern for the MPAA if the annuity was bought outside the SIPP (unless you find one with a zero increase when inflation is negative)   Perhaps someone knows.

I do wonder how easy it will be to follow @dunstonh's suggested route.  The SIPP is a personal pension and the annuity is a personal pension.  When you buy an annuity what usually happens is there is a transfer from the SIPP personal pension to the annuity personal pension.  You'd have to make sure the SIPP was comfortable with not following the usual course and instead would treat the annuity personal pension as an investment.  You may well need an IFA who has done it to talk them through it.

And then as @dunstonh says you'd need to find an annuity provider who would play ball.

Marcon

An annuity isn't a personal pension - it's a contract of insurance.