Fixed term annunity or drawdown

Berathe007

I am 59 and looking to retire at the end of May when I turn 60.

I have a DB scheme which I intend to cash in early foregoing the lump sum in favour of a higher monthly income.

I also have a DC pension with Aviva of £148000. My intention was to buy a fixed term annunity with £100k (with a lump sum of £35000 on maturity) giving £12000 p.a. for 7 years until my state pension starts. The remainder would be in drawdown. I obtained a number of quotes from Retirement Line

However, Aviva has now informed me that my only options are a lifetime annunity or drawdown.

I am now unsure what to do. I thought I could transfer to another provider to get a fixed term annunity but preliminary enquiries indicate that even so this can only be done via an IFA. I am now wondering if I should opt for drawdown with the full £148000 but will I be losing out? I can still take £12000 p.a but the amount remaining when I hit 67 (even with investment) would be less than the £48 000 plus the majority lump sum after the fixed term. (64 000 vs 83 000) esp. as I would have been leaving the £48 000 invested.

I don't really understand as it looks like I will be losing out and I am very confused. Is there something obvious that I don't understand to do with tax or rates of return? I have no debts or anything I want to spend a lump sum on.

Many thanks

Marcon

Does your Aviva pension have a Guaranteed Annuity Rate? If so, that's why advice is mandatory before you could transfer it. If it has no 'Safeguarded Benefits ' then you simply transfer to a provider which deals direct with retail clients and doesn't require you to go via an intermediary

dunstonh

However, Aviva has now informed me that my only options are a lifetime annunity or drawdown.

Fixed-term annuities fall under drawdown. They are classed as flexible benefits.

 thought I could transfer to another provider to get a fixed term annunity but preliminary enquiries indicate that even so this can only be done via an IFA

FTAs are normally purchased via an intermediary. An IFA is an intermediary, but so is an annuity website.

 Is there something obvious that I don't understand to do with tax or rates of return?

We cant tell from what you have said what you do or do not understand. A comparison of investment returns, from best to worst over the period, would need to be considered, including where the guaranteed method sits in that range. FTA rates are quite good at the moment, and recent ones I have done have seen the FTAs come in around the same level of optimistic returns. i.e. around the top 30% of outcomes. (asset mix of the investments will alter the positioning)

When a guaranteed option can deliver an outcome better than 70% of the risk based outcomes, it is well worth considering.

Berathe007

Thanks.

https://forums.moneysavingexpert.com/discussion/comment/81924930#Comment_81924930

From what Aviva said, my pension product doesn't allow fixed term annunities with or without advice so my only option would be a drawdown or a lifetime annunity which I dont want. So yes, a transfer would be the only option

But from @dunstonh it seems that I could go via Retirement Line

Investment returns; it does seem impossible to tell. From waht you say, it might be that i understand better than I thought and FTAs are simply good value at the moment

DRS1

Have you asked Retirement Line about this? They should know if there really is a problem funding a Fixed Term Annuity from a certain type of Aviva pension - after all setting up annuities is what they do. If there is a problem (and it is not just an Aviva call centre bod speaking out of turn) they may well know a solution (though a transfer to a more modern scheme is probably what they would suggest).

Have you considered taking the maximum TFLS (it is only about £37k and you could get that into an S&S ISA over two tax years) and then using the balance of the Aviva pension to buy your Fixed Term Annuity? You could invest the S&S ISA in whatever it is you would have invested in within the pension.

What were you planning to do with what is left at the end of the fixed term annuity? Buy another annuity?

Berathe007

Thank you. Funnily enough, I have just emailed Retirement Line to ask. Hopefully, they can tell me more.

Taking the maximum TFLS is an possibility, I will think on that. And yes, another annunity would be considered as an option.