How to partially annuitise from a drawdown fund

Annuitydilemma

I’m 72 and have recently retired. I was previously paying into my employer's DC pension scheme with Scottish Widows (SW).

I’m now looking to take an income from my pension savings. Annuity rates are attractive, but I would like to hold back some of my savings, at least until I am 75, while my children will have the opportunity to inherit my pension savings free of income tax should I die before then. My estate will be subject to IHT and I’m aware that this will impact pension savings from April 2027. 

I’m in receipt of state pension and a pension from a previous DB scheme. 

Money Helper’s annuity calculator shows that Scottish Widows are offering the best level annuity rate for me. With this in mind I transferred my SIPP into SW and have taken and gifted the tax-free cash. During this process, I discovered that, despite SW website stating that retirement options can be combined in many ways, I can only buy a SW annuity if I use my entire SW pension savings to do this. The crystalised funds (£450k) are now sitting in a SW Drawdown account.

I’ve had many conversations with SW and have been given differing and confusing information about next steps. 

I would welcome advice from the forum.

dunstonh

Money Helper’s annuity calculator shows that Scottish Widows are offering the best level annuity rate for me. 

Moneyhelpers' rates are not reliable enough to use to make a purchase decision.   They are snapshots and do not include commercially obtained terms.     I have been finding SW only coming out best on indexed annuities or where specific death benefts are selected (quote engine quirks a lot of the time).

I’ve had many conversations with SW and have been given differing and confusing information about next steps. 

SW do not hold advice permissions. So, they will tread a very fine line.  Plus, their frontline staff are not trained to know what you could do.    Call centre workers wouldnt be call centre workers if they had knowledge.

 despite SW website stating that retirement options can be combined in many ways, I can only buy a SW annuity if I use my entire SW pension savings to do this.

both statements are correct.    

Basically, you made a mistake in transferring the pension to SW and taking the 25% TFC.   
a) you didnt need to transfer it to SW as SW pensions and SW annuities are not the same thing.
b) the annuity should have been bought from the uncrystallised funds split how you wanted it and then crystallised after transfer.

If you used an advice service, you would have grounds for complaint.  If you did it all yourself, then you can only blame yourself.

There are some niche products available to IFAs where you can buy a fixed income within a drawdown plan.  Less so to the DIY market.  Alternatively, you could buy gilts and retain the fund until you are ready to purchase an annuity.  Gilts can be used to hedge annuity rates.

Secret2ndAccount

You don't have to deal with SW directly. Talk to an annuity broker. Get the best quote. Sign the forms. They will apply to SW for a partial transfer to the annuity provider (who might happen to be SW).

Try https://www.retirementline.com/

Make sure to disclose all illnesses/medications when completing the online questionnaire. Being unhealthy can get you a better rate.

Agreed, it would have been much easier if you had done this before going into drawdown

Annuitydilemma

Thank you both very much for responding. I realise I made a mistake. I got caught up in a bit of pre-budget panic. I'm just trying to understand my options and avoid another mistake