Fixed term Annuity

Nick9967

So after a few years of watching, learning and a few posts to boot! you guys have been essential in my pension learning curve, I now have so many detailed spread sheets all connected , lots of the info supplied by you, so thanks to all!
I think I'm now fairly confident & pretty settled on what I'm going to do, in circa 12 months from now! I'll be 59 and 6 months give or take.

safety and simplicity ruled in the end, my income requirement goes up and down through the first 20 years or so due to part time work for first 3 years , then SP kicking in etc so rather than rely on markets being normal and leaving it invested in what i have now or similar,
(It's not a big pot but will see me through with my 2nd property for later!)

So take my 25% tax free circa £55k put it into ISA's or similar between myself and OH, spread the tax liability on interest etc. This will be used to take from annually the equivalent of what my tax free portion would have been if I just did simple drawdown, at 2.5% interest that will last the course!

remaining 75% circa £250k will buy a fixed term annuity at about £19k pa, obviously taxable.

Note: i know the figures don't add up exactly as i took some TF last year 
so my pots are currently a mix of crystalised and uncrystallised (all with SW) - which I'm quite familiar with (again thanks to you all)

Couple of questions for some guidance if anyone can?

1. Anyone know the best route to purchase fixed terms - myself ? or advisor ? even better who normally gives best rates for these?

2. Fixed term Annuities am I correct in saying that FT's pay for the term regardless of what happens to me? 

The idea is that the fixed term covers what I need and on many years gives me surplus which will be added to a "savings pot(s)" as I go along , I theory giving £100k residual at the end, + interest.

any obvious holes in that or miss apprehensions by me?

Thanks all



 

SVaz

You can’t buy a FT annuity ‘off the shelf’ as it were.
You have to go through an intermediary/agent like Canada Life / Legal and General etc. 
It may look like you can when you use a comparison site for the best rates but when you click through and start digging you find that you can’t. 

There seem to be varying degrees of protection with them and you can also choose what capital you want returned at the end.
I decide against one just yet and went for a 5 year Gilt ladder from 2034-38 instead.
I’ll probably go for one when I’m 75 though.   

Nick9967

Thanks SVaz, don't think I'm confident enough for a Gilt ladder, actually I wasn't aware you couldn't buy fixed term annuities off the shelf , every days is a school day as they say! looks like I'll have to go via an IFA in that case, I do know one was just trying to avoid it for simplicity as I know what I want, be interesting to see if they get the same rates as the normal calcs , Canada Life seems to come out tops on many

SmokeysTravels

You can use the annuity quotation tool on Moneyhelper to get fixed annuity quotes. The contact details for these providers are all on there. You can contact the provider to see if they will deal with you directly. If so they will provide you with a quote and application form. You let them know on the application form where the pension pot is coming from. Usually, they then arrange for the transfer to take place and once they have the money will set up and start paying your fixed term annuity. 

However, they may tell you they do not deal directly with customers. If this is the case then you will need to either go through an annuity desk such as Retirement Line or go through an independent financial adviser. There will be costs involved but you may end up with a better rate than going direct, so it’s worth shopping around. 

Death benefits from providers can vary so it’s really important to check. For example, it might just be a refund of the pension pot less withdrawals taken prior to death. It’s always worth making sure they are aware of who you want the death payments to go to by completed an expression of wish form.

SVaz

The streamlit Gilt calculator tells you exactly which Gilts to buy when you input the amount and timeframe you want and there is an explanatory section of cash flows.
  The only decision is whether you want Index linked or normal Gilts.
I went for normal and just over inflated the yearly amount I wanted to partly account for inflation - I have an inflation protected Military pension so the Gilts are just a top up as they start the year after I get my State pension.
If I was relying on the income I would have gone index linked, they are significantly more expensive to buy. 

The thing I like about Gilts is that you can sell them at any point if circumstances change.

Yorkie1

How long will the annuity be for? If more than a few years, have you considered the impact of inflation and looked at quotes for inflation protected (fixed % or RPI) policies?

Nick9967

SmokeysTravels said:

You can use the annuity quotation tool on Moneyhelper to get fixed annuity quotes. The contact details for these providers are all on there. You can contact the provider to see if they will deal with you directly. If so they will provide you with a quote and application form. You let them know on the application form where the pension pot is coming from. Usually, they then arrange for the transfer to take place and once they have the money will set up and start paying your fixed term annuity. 

However, they may tell you they do not deal directly with customers. If this is the case then you will need to either go through an annuity desk such as Retirement Line or go through an independent financial adviser. There will be costs involved but you may end up with a better rate than going direct, so it’s worth shopping around. 

Death benefits from providers can vary so it’s really important to check. For example, it might just be a refund of the pension pot less withdrawals taken prior to death. It’s always worth making sure they are aware of who you want the death payments to go to by completed an expression of wish form.

Thanks yes that calculator is quite good I use it a lot, I will check the death benefits thanks

Nick9967

Yorkie1 said:

How long will the annuity be for? If more than a few years, have you considered the impact of inflation and looked at quotes for inflation protected (fixed % or RPI) policies?

20 years, if I can afford 25 at the time I will , yes to inflation , my inflation is based in my costs/budget and so is pretty sound I think, so for example 5% on council tax pa, 4% on food (I can choose where and what to buy to stay in budget, etc etc, and my SP covers some further inflation of course as well, I have a small DB with fixed annual 5% as well, 

dunstonh

What financial need do you have for a 20/25 year FTA?    Why not a Lifetime annuity?

Nick9967

dunstonh said:

What financial need do you have for a 20/25 year FTA?    Why not a Lifetime annuity?

Lifetime annuity doesn't give me the annual income i need , i have looked at about 50 variations using Moneyhelper calcs, which I find quite useful, my income varies quite a lot for the first 10 years then flattens out a bit, from age 80 i have a second property which will see me through the remainder + owned house, likely downsize a little for another £75-£100k, residue of the FT annuity and TF cash form the beginning + 2 * FSP, OH has LGPS and i have a small DB. A large part of the decision after 3 years of pondering draw down etc is security - a known outcome is higher on my agenda the closer i get!