Annuity Interview question.

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coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

Yes,

That is one of the deciding factors, I will pay 20% tax on every single penny I receive except the TFLS, this increases how long it takes before the (Cumulative total not allowing for the loss in spending power in real terms of having the TFLS on day 1) 100% flat rate payout that goes into my pocket overtakes the zero TFLS by a year.

Plus if I drop dead with the excitement of receiving my first payment, at least I've had 25% of my pot back!

katejo

coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

That's very useful info thanks. I will be getting a tfls when I retire and a financial advisor suggested I might use some of it to buy an annuity. I don't want to do that but was looking for good reasons to give if he brings it up again! 

DRS1

katejo said:

coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

That's very useful info thanks. I will be getting a tfls when I retire and a financial advisor suggested I might use some of it to buy an annuity. I don't want to do that but was looking for good reasons to give if he brings it up again! 

There may be two different things here.

First is you don't take a TFLS from the pension pot and just use that money to buy a bigger pension annuity.

Second is you DO take a TFLS from the pension pot and then use the TFLS to buy a purchased life annuity.

All the pension annuity is taxable (though obviously some of it may be within your personal allowance)

Only some of the purchased life annuity is taxable because part of it is treated as a return of your capital.

So a purchased life annuity may not be as bad tax wise as a pension annuity.  They are however a lot rarer and only a couple of insurers provide them.

katejo

DRS1 said:

katejo said:

coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

That's very useful info thanks. I will be getting a tfls when I retire and a financial advisor suggested I might use some of it to buy an annuity. I don't want to do that but was looking for good reasons to give if he brings it up again! 

There may be two different things here.

First is you don't take a TFLS from the pension pot and just use that money to buy a bigger pension annuity.

Second is you DO take a TFLS from the pension pot and then use the TFLS to buy a purchased life annuity.

All the pension annuity is taxable (though obviously some of it may be within your personal allowance)

Only some of the purchased life annuity is taxable because part of it is treated as a return of your capital.

So a purchased life annuity may not be as bad tax wise as a pension annuity.  They are however a lot rarer and only a couple of insurers provide them.

I don't have a pension pot. It is a DB pension 

DRS1

katejo said:

DRS1 said:

katejo said:

coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

That's very useful info thanks. I will be getting a tfls when I retire and a financial advisor suggested I might use some of it to buy an annuity. I don't want to do that but was looking for good reasons to give if he brings it up again! 

There may be two different things here.

First is you don't take a TFLS from the pension pot and just use that money to buy a bigger pension annuity.

Second is you DO take a TFLS from the pension pot and then use the TFLS to buy a purchased life annuity.

All the pension annuity is taxable (though obviously some of it may be within your personal allowance)

Only some of the purchased life annuity is taxable because part of it is treated as a return of your capital.

So a purchased life annuity may not be as bad tax wise as a pension annuity.  They are however a lot rarer and only a couple of insurers provide them.

I don't have a pension pot. It is a DB pension 

OK So similar choices just different language

First commute less pension for PCLS (or reverse commute PCLS for more pension)  Pension all taxable.

Second take PCLS and use it to buy purchased life annuity.  Not all of purchased life annuity income is taxable.

katejo

DRS1 said:

katejo said:

DRS1 said:

katejo said:

coyrls said:

In your calculations, have you taken into account that your TFLS will be tax free and your annuity payments will be taxed?

That's very useful info thanks. I will be getting a tfls when I retire and a financial advisor suggested I might use some of it to buy an annuity. I don't want to do that but was looking for good reasons to give if he brings it up again! 

There may be two different things here.

First is you don't take a TFLS from the pension pot and just use that money to buy a bigger pension annuity.

Second is you DO take a TFLS from the pension pot and then use the TFLS to buy a purchased life annuity.

All the pension annuity is taxable (though obviously some of it may be within your personal allowance)

Only some of the purchased life annuity is taxable because part of it is treated as a return of your capital.

So a purchased life annuity may not be as bad tax wise as a pension annuity.  They are however a lot rarer and only a couple of insurers provide them.

I don't have a pension pot. It is a DB pension 

OK So similar choices just different language

First commute less pension for PCLS (or reverse commute PCLS for more pension)  Pension all taxable.

Second take PCLS and use it to buy purchased life annuity.  Not all of purchased life annuity income is taxable.

I am not inclined to take an annuity at all. I'd rather just take a tax free lump sum (either the standard amount or slightly reduced) and have the taxable pension income (with index linked increments).