Best place to find best annuity rate

sallyjo_2

Hi,

What's the best way to find the best performing annuity at the present time?

I want to close a pension scheme that both my employer and I paid into, running since 2002, and take the lump sum, and buy an annuity with the rest. I was recently made redundant so employer not contributing anymore and it is transferred to me. I am now working contract so income more variable. I want to apply the 25% for reduction of my mortgage principal.

I know there are different types of annuities that give increased payouts year on year, but I have decided that I want the maximum payment each year now, and have estimated that I will be better off that way for at least the next ten years. That is ok with me.

Details:
- I am 50, pension is unit linked policy with Friends Provident,
- Fund worth about £28K, so £7k off the mortgage "everylittlehelps".
- FP tell me that because pot is less than £100K that I can't keep the policy open and I have to buy an annuity with it. That is fine with me, and I don't want necessarily to buy from them. Colleagues have told me their annuity rates are not as good as others.
- I don't want to reinvest the annuity in another pension though I plan to put it in my ISA savings. I'm told I'll be lucky to get an annuity payment of about £1k per year. WOW!
Any help most welcome! Thank you.

Retired_I.F.A.

By transfering it to a Personal Pension or a SIPP that allows drawdown you can take the 25% tfc and leave the balance invested and drawdown an income if you want as well as make further contributions. Plus that income drawn down can currently be a fair bit higher than the best annuity which would cease on death whereas on death in a drawdown plan the remaining fund less 35% is available to your wife/dependents.

This is what I presume Friends prov meant but their plan may need a 100,000 minimum input.


Do you still want an annuity?

like a hole in the head I bet

EdInvestor

sallyjo wrote: »

What's the best way to find the best performing annuity at the present time?

You can get an idea of who's offering what here:
https://www.fsa.gov.uk/tables

I want to close a pension scheme that both my employer and I paid into, running since 2002, and take the lump sum, and buy an annuity with the rest. I want to apply the 25% for reduction of my mortgage principal.

The latter idea makes sense but buying an annuity at age 50 doesn't, especially for a woman.

I know there are different types of annuities that give increased payouts year on year, but I have decided that I want the maximum payment each year now

In that case you want income drawdown which will pay you 120% of the annuity rate, and offers the chance for the fund to grow and the income to rise.

FP tell me that because pot is less than £100K that I can't keep the policy open and I have to buy an annuity with it.

That's only the ruke at FP.If you transfer it to a Self invested pension (SIPP) at somewhere like https://www.h-l.co.uk it's a different story.You can take the lump sum and leave the rest invested, either drawing no income, or drawing the highest possible income available on a pension.

Beats annuities into a cocked hat.

Retired_I.F.A.

Quote:
I want to close a pension scheme that both my employer and I paid into, running since 2002, and take the lump sum, and buy an annuity with the rest. I want to apply the 25% for reduction of my mortgage principal.

The latter idea makes sense but buying an annuity at age 50 doesn't, especially for a woman.

Not if the mortgage is affordable. If it isn't then yes reduce it but othewise taking the 25% tax fee cash from an almost 100% tax free invested fund that over the long term has histoically and is expected in the future to yield a greater rate of return than the rate charged on a mortgage does not make sense.

sallyjo_2

Thank you for the advice about income drawdown and SIPs, and links.

I really don't want an annuity. Ideally I'd like to keep the rest invested, but if I can draw down money and keep investing, that seems even better. It carries a higher risk but with this fund I am happy to treat it this way.

I had heard a little about income drawdown from my last company's IFA who gave us all a little presentation about options with pension investing before Christmas (hoping that those of us leaving would put some of our redundancy pot into it presumably). However when I asked Friends Provident, annuity was the only option offered (over the phone) when I said I wanted the 25% and to keep the rest in. Pity, though I see from fsa that their annuity rate is disappointing. Best to move it.

Thank you too for the advice about leaving the 25% in. I can afford my mortgage but barely. If interest rates and inflation climb (and recession affects the job market) I will be in trouble, hence I am reducing the principal as fast as I can. I would like to be in a position when I hit my mid 50s to be able to throw money at investment for retirement (and myself) not the house or other debt.

dunstonh

However when I asked Friends Provident, annuity was the only option offered (over the phone) when I said I wanted the 25% and to keep the rest in. Pity, though I see from fsa that their annuity rate is disappointing. Best to move it.

Providers can only offer what they have available. FP dont offer it on their contracts but there are plenty out there that do so its no big deal.

dunstonh

Is there anything else I should bear in mind?

Dont rely on tables to choose provider. They are notoriously unreliable (usually due to out of date annuity rates or bog standard rates and not negotiated terms). Plus, many annuity providers do not make their rates available online but require manual illustration.

Remember things like with or without proporation, income in advance or arrears, guarantee (whether 5 or 10 years or with value protect) and obviously smoker, post codes and medications will impact. Plus, finally you can often haggle between providers to squeeze more out of them.