Do we go for Joint Life????

stagey_2

again thank you all for your advice - I have spent some time today comparing what the Pru are offering and using various annuity calculators - and yes the Pru does indeed give better rates - tho' I don't know whether these take into consideration that my husband is a smoker (tho' we did say) I have also mangaged to get another tele no for Pru in Ireland where we do at least understand each other and I can hear what they're saying - so will contact them first to clarify certain matters - then to find that commission IFA who might share it with us!! again sincere thanks.

JeremyZerg

Hullo.

Sorry for jumping in late. I just thought the following link might be of use: http://www.fsa.gov.uk/tables - that is, if someone's not already pointed it out, or you've not found it yourself!

You can compare annuity rates for all the main providers and customise the quote to your individual circumstances (health, age at retirement / annuity purchase, annuity preferences, etc.)...

I'd also echo the sentiments expressed earlier: fully research Guaranteed Annuity Rates, if they are offered on your policy!

Good luck. :-)

EdInvestor

Retired_I.F.A. wrote: »

Go to a local IFA luv he wont charge you one penny just say you want advice on annuities and are happy for him to be paid via commission, take the paperwork you have with you and hubby of course.

Patronising or what?

I have nothing against local IFAs, the trouble is the variation in quality between the best and the worst IFAs is so large that there's a big risk you'll get a bad one and it's very hard to check them out .The independent (non salesforce) online IFAs that I mention will offer minimum quality standards and have a public reputation to protect, unlike Joe Blow IFA in the High St that nobody's ever heard of.

Retired_I.F.A.

Patronising or what?

Oh go burrn yer bra somewhere else Ed.. luv, mate, chick kock, me wench, chief whatever at least I talk plain English and make sense.

I have nothing against local IFAs, the trouble is the variation in quality between the best and the worst IFAs is so large that there's a big risk you'll get a bad one and it's very hard to check them out .

And how the hell do you check out an online IFA at the other end of the country?
How do you communicate with him/her, by phone and mail? . 99.99999% chance of never speaking to the same guy twice too.

The independent (non salesforce) online IFAs ...

crap ! Anyone selling advising or advertising is a salesperson.

....that I mention will offer minimum quality standards and have a public reputation to protect

as will every IFA in the country.. A local IFA who screws over a client is soon out of business. Word gets round a town far quicker than round a country.

....unlike Joe Blow IFA in the High St that nobody's ever heard of.

that nobody 100 miles away has never heard of you mean.

Yeah well done Ed advise the OP to do it all by phone and mail with the firms you state probably 100 miles away from her who she'll never see face to face. or speak to the same person twice. you've excelled yourself yet again here Ed. What's up ? given up on the knitting? (now that you can consider as patronising.)

stagey_2

thank you re fsa site - had found it and had compared - also found out that Pru don't give enhanced rates for smokers - still not managed to speak to anyone yet - they'd shut up shop by the time I rang. Also in small print in allthe bumph theysay that if we go via another, the quote may change! hmm. I'm wiser, but not clear yet!! thanks again

jamesd

stagey, for imparied life annuities like those for smokers a local IFA is likely to be your best way to buy. You can find some via unbiased.co.uk .

If one of you is a smoker and the other isn't that would reduce the extra annuity payment available from being a smoker so it may be worth getting a single life impaired life annuity with some of the money to get as much money as possible while you're both alive - good to cover say the extra living expenses and taxes you have to pay for two people compared to one.

It's not required to buy the same type of annuity with each pension fund. A joint life pension with 10 year guarantee and escalation with RPI inflation or at 3 or 5% is most expensive. The escalation means that the pension value increases each year to allow something for inflation but means that the starting value is a lot lower. You end up worse off if you live a little time and better off if you live a long time with the escalating types.

What you might consider is how much you need to live on on your own, then go for a joint life RPI pension with long guarantee for that money. For the rest he could get an escalating pension in his own name only or a part escalating and part fixed annuity in his own name, both of them impaired life. The non-escalating one will pay more at the start when you're both relatively young and perhaps interested in travel more than when older.

An IFA can halp you with this sort of calulation.

It's also not necessary to buy an annuity when you take all or part of the tax free lump sum. Your pension investment company may not let you do anything else but it's easy for an IFA to help you move the money somewhere else so you can leave the money invested and growing for a few more years. This way you can take only as much lump sum as you want and also can delay taking the annuity until you're older. Since annuities pay more the older you are when you buy them, this delay can increase the income quite a bit.

It's also not necessary to buy an annuity at all. You can leave the money remaining after taking the lump sum invested and take an income from the investments instead. This tends to be better for people retiring fairly early and those who won't worry greatly about the varying capital value of the pension fund as the stock markets go up and down over the years. It's a nice option if you have an IFA managing the money for you and giving you regular updates and investment reviews as part of the service. You can do this and also have an annuity purchased with some of the money to guarantee the minimum income you need.

You also do not need to take any income at all just to take the lump sum, though again your current pension provider might not let you do that so it might take a transfer to arrange it. Easy and routine stuff for an IFA to arrange.

When retired, the pension is initially paid as income to the person who bought the pension, your husband in this case. That means that taking the income now might mean paying unnecessary tax if you don't actually need the income yet.

Also, you both get your own personal allowance and it's best to try to balance the pension income between you. That way you get up to two complete personal allowances instead of just his. Big potential tax saving there and since you're both still working it looks as though you have time to arrange at least some of this.

What you two can do is have up to 100% of your current salary paid into a pension for you, with the money coming from both of you. Then you can take this pension yourself when you need it. If that's early you get the tax benefit. If it's later, it'll have had longer to grow and you can get both the tax benefit and a boost income if you wait until after his death before taking it. Or if you were to die first, it'd all be transferred to him.

You'll get whatever means tested benefits your income at the time entitles you to. So if your income drops, you'd be eligible for more benefits.

However, I'm concerned about your objective. Because investments grow at a higher rate than mortgage interest it's usually a bad or very bad idea to take a pension early just to pay off a mortgage. Particularly if it's a repayment mortgage rather than a pension mortgage (which are mostly only taken out by people paying higher rate tax). Better usually to leave the money invested and growing for as long as possible and keep paying the mortgage payments. Paying off a mortgage with a pension basically cuts your income for the rest of your life for the small gain from paying off the mortgage early.

The trouble with the mortgage payment option close to retirement is that you've nowhere near enough time for any investing of the extra spare money to grow enough to make up for the lost capital you used to pay off the mortgage. It's OK if you find it comforting to know it's done with, but it's not a great financial choice.

The course that's most likely to leave you best off in retirement is getting an IFA to review your current pension investments, make sure that they are invested well and then not take any part of them until it's time for you to retire. That's the time when you could consider paying off the mortgage with some of the lump sum, though even then you'd probably be better off by putting the lump sum into investments in a stocks and shares ISA (which can invest just like a pension) and continuing with repaying the mortgage from the income.

Retired_I.F.A.

"As others have hinted but perhaps not clearly enough, when the guarantee period ends, you will no longer get any money from that pension. It's for the common case where one partner dies a few years before the other, so the survivor gets the pension for a few more years, up to as many as the guarantee says - commonly five or ten more years."

Actually I said it far clearer with:

"..the g-teed term on an annuity quote means that should the annuitant die then the spouse gets the same full annuity for the remainder of the term of the g-tee then the % of the full annuity."

jamesd

Retired I.F.A., OK, I've removed that from my post.

stagey_2

phew - thanks Jamesd - a lot to digest. I appreciate that it is best to keep pensions running for as long as poss - however, my husband is a self employed builder and at 63 it gets a bit tough sometimes (his elected date to retire is next yr anyway) also the pensions are not huge once the tax free lump sum is used the pot is about £71000, also I could be made redundant this year - also being in the trade employed by a developer - and we've stopped developing!! So the contigency plan is to pay off the mortgage so that if our income drops we don't have to worry about that - we started late so still paying around £750 per month with 20 months to go till completion - we come off a tracker in August 08 - hence contingency plans. The other was to go interest only and then repay with an endowment (not currently linked to mortgage) in 2010. The quote we have closes on 6/6 - so not long to decide - also there was some small print somewhere which said if we took the annuity via another the quotes might change! and they don't do 'smokers' quotes. PS - re IFA's my experience has not been that good in the past - missold endowment in 1988, and some years ago the IFA we had to look at our pensions provison did not understand RAC having taken ages to get basic info , so passed it to someone else who after a month we chased, he'd just had a baby! and then he never got back to us - so gave up! and that was a recommendation - so difficult to know who to go with so looking in yellow pages!!!!

moneyguru_2

I would approach a discount annuity broker. They refund a proportion of the commission that the annuity/insurance company pays the broker.

I'm sure you're already aware, every benefit you add on top of the basic single life pension comes and a cost and results in your starting pension level being reduced. You need to get figures to see the effect adding spouse's pension (I assume that's what you mean by joint life) or a 10 year guarantee so that you can make an informed decision.