We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Is it wise to buy annuity now and continue to pay into pension pot
Hello, I'm 55 and have a pension pot of £60,000 I was wondering if it would be better to use ALL the pot to buy an annuity now, then use the mothly annuity income to pay into a new pension pot with the view to buying another annuity in the future….
OR take 25% tax free (£15,000) and buy an annuity with the remaining £45,0000, and use the annuity income and the interest from the lump sum to pay into a new pension pot.
The reason for considering these options is that although I am currently working part time on a zero hours contract, I find myself now having to be financially independent and thought I could use the annuity/lump sum money as a sizeable contrubition to my household bills etc in the event I couldn't workdue to illness etc but in the meantime I could use the income to pay into a new pension so keep saving for the future.
Thanks for your guidance and opinions :-)
Comments
-
A £60k pension pot won't buy a particularly large annuity.
Will you have sufficient earned income to still make payment into pension?
0 -
Yes I will (hopefully), and I don't need the monthly annuity payment money so I planned to pay that into the pot too. Does that sound like a reasonable idea?
0 -
Your maximum gross pension contribution is limited to earned income.
I think you will also be limited to the MPAA
0 -
If you're in good health, £60k will buy you an index-linked annuity of around £2400 pa. That's not much of a hedge against unemployment.
I'd think you're likely to be better off not buying an annuity at this stage.
Do you have an emergency fund in eg. a cash ISA? Enough to bridge any likely gaps in your employment? Or any other savings?
N. Hampshire, he/him. Octopus Intelligent Go elec / Fuse gas / Vodafone BB / iD mobile. Kirk Hill Co-op member.Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Ecoflow Stream, Best kettle :-)
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 37 MWh generated, long-term average 2.6 Os.0 -
NO!!!
Buying an annuity does NOT invoke the MPAA!
1 -
I was wondering if it would be better to use ALL the pot to buy an annuity now, then use the mothly annuity income to pay into a new pension pot
Just wondering if HMRC would consider this recycling?
0 -
It would trigger the flow chart check.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thank you.
What an odd exclusion to the rules!
0 -
No. OP has said they would use the whole of their DC pot to buy an annuity, so by definition they wouldn't have taken any tax free cash - so no danger of recycling taking place.
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
Unless they go the alternate route and take a £15k TFLS.
0
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 355.8K Banking & Borrowing
- 254.9K Reduce Debt & Boost Income
- 456.2K Spending & Discounts
- 248.3K Work, Benefits & Business
- 606K Mortgages, Homes & Bills
- 179K Life & Family
- 263.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.7K Read-Only Boards