Annuity quotes

eastcorkram

I got a quote through HL. I'm not sure whether to go the annuity route or not, I'm just looking into it. It would use the money in the HL sipp.

The highest single life, no increases, no guarantee figures are

Just. £9374

L and G £8654

Scottish Widows £7581

Aviva £7105

So, there's quite a variation. I'm not sure why anyone would choose anything other than the top one. Although, I have to say, I've never heard of them! But hopefully it's all covered by FSCS.

Initially I was thinking that it would be better linked to RPI, but the highest figure then is Just, paying £6988.

Not great at maths, but surely it would take a lot of years for that figure to overtake the £9374 they're offering with no rises.

I'm nearly 67, retired, and this money is not vital. Needs are met with SP and DB. I don't have much or any knowledge of investing, so I'm thinking maybe it would be simpler to get the annuity rather than using drawdown.

Just because I've never heard of Just, would it be safe to use them, and would I be ok if they cease trading?

OldScientist

Others will know more about Just than I do, but a read at https://www.wearejust.co.uk/about-us/ at least gives some background.

Provided your annuity is a 'contract of long-term insurance' then it will be fully covered by the FSCS in the event of company failure (e.g., see https://www.fscs.org.uk/what-we-cover/pensions/ ).

Given the figures you have provided it would take just under 7 years at UK average inflation of 4.5%* for the instantaneous income from the RPI annuity to exceed that of the level annuity (i.e., 6988*1.045^7=9509). Obviously, high inflation early in retirement (think 1970s!) would make things worse for the level annuity.

At 67yo life expectancy is to 85yo and a 33% chance of reaching 90yo (if male, 88yo and 46% chance if female) so there are (hopefully) a lot of years for inflation to act.

Needs are met with SP and DB. I don't have much or any knowledge of investing, so I'm thinking maybe it would be simpler to get the annuity rather than using drawdown.

If the income from the annuity is surplus to requirements (it is not clear whether you will spend it or not), you'd need to think what to do with it (which may, or may not, be more complex than drawdown!).

* Annualised inflation from 1932 onwards (i.e., when the UK left the gold standard) was about 4.5%.

dunstonh

So, there's quite a variation. I'm not sure why anyone would choose anything other than the top one. Although, I have to say, I've never heard of them! But hopefully it's all covered by FSCS.

Just have been around for donkey's years. They're one of the largest annuity providers. You can trace their origns back to the Britannic.

Initially I was thinking that it would be better linked to RPI, but the highest figure then is Just, paying £6988.

For RPI, that sounds quite attractive.Especially as the expectation for the future is higher inflation.

Not great at maths, but surely it would take a lot of years for that figure to overtake the £9374 they're offering with no rises.

It's easy enough to model using reasonable assumptions. You also need to take into account whether the annuity income is necessary to cover your committed expenditure or whether it is used for discretionary or lifestyle-enhancing expenditure.

If you need it for committed expenditure, then not having an indexation is high-risk. If it's for your lifestyle discretionary expenditure, then having it erode over time is not as much a risk.

Just because I've never heard of Just, would it be safe to use them, and would I be ok if they cease trading?

You probably haven't heard of most of the top financial services companies. Just because you haven't heard of them doesn't make them unsafe.

DRS1

You might want to run your figures through another annuity quoter (eg the Moneyhelper one) and see what results that comes up with.

I only mention this because when I did that 2 years ago Just came top with HL but Standard Life came top with Moneyhelper and Just was well down the list. It made me wonder if Just had a special deal with HL.

If nothing else it would give you some other figures to compare to the HL quotes. And may show you that using HL is better than not using them.

dunstonh

I only mention this because when I did that 2 years ago Just came top with HL but Standard Life came top with Moneyhelper and Just was well down the list. It made me wonder if Just had a special deal with HL.

Just has real-time pricing and if they feel there is an opportunity with a batch of gilts, they will push their annuity rate up for a very short period of time to take advantage of it). This can result in them having periods where their pricing is not competitive and than a couple of days when it is quite a bit above the rest.

Just are also a provider that will allow IFAs to contact them to get improved rates over the default.

El_Torro

Is inheritance a factor in your thinking? An annuity dies with you, any money left in your pension while drawing down does not (though may be subject to inheritance tax).

You also say that you don't need the money, your state pension and DB are enough. This is another reason not to get an annuity, just take money if you're going to spend it. I appreciate that you say you're not confident to manage your own investments, this skill can be acquired though. Especially if you're managing money that you don't really need (takes the pressure off).

super_reds

https://forums.moneysavingexpert.com/discussion/comment/82116581#Comment_82116581

A point that might be worth considering specifically on RPI. My understanding is that either RPI will disappear or the calculation thereof changed to mirror CPI or CPIH (can't remember which) around 2030. As such the 'RPI' increases which typically have been c1% p.a. on average higher than CPI/CPIH will disappear.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82116626#Comment_82116626

Interesting . I ran around 5 scenarios very recently through the Moneyhelper annuity tool, and I am a similar age to the OP. For each one SL came top.

The quote from Just to the OP seems rather high to me. On Moneyhelper a request for a quote for £100K - Level annuity - Single life - no guarantee- the top quote came out about a £1000 pa less than the Just quote to the OP.

( I am assuming the OP ran the HL tool on a sum of £100K )

OP - Do you have any health problems that are significant, that you included in the HL tool - it could be the insurers are reacting differently to these.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82116823#Comment_82116823

I think it is CPIH which replaces RPI.

eastcorkram

https://forums.moneysavingexpert.com/discussion/comment/82117136#Comment_82117136

Stage 3 cancer . Major surgery last year. So, I put all that info in. As far as I know, I'm currently fine. Have regular scans. I also put that I smoked for 35 years, which is true. Stopped about 12 years ago. If you get a higher figure if you're a smoker, why don't people just say they smoke 40 a day even if they don't?

So maybe that's why the figures are higher, though even I was surprised at that top one! Sipp figure was around £95,000.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82117227#Comment_82117227

Glad you are OK !

I would guess that the different insurers systems are responding to your health problems differently, which would explain the large disparity in quotes.

If you get a higher figure if you're a smoker, why don't people just say they smoke 40 a day even if they don't?

I have asked a similar question before and the answer is that it would be fraud, and if discovered could invalidate the whole policy. I guess these insurers are not that daft .