annuitiies

I am a pensioner aged 66, and must now convert my personal pension fund, a little one worth about
£ 33,000 to a compulsory annuity.
The fund was started in 1983/84 when I was resident in UK.
I am now resident in Spain.
At present, the best annuity I can find, ( the Pru), pays about 6% for myself and my wife as a joint for life payment. Costs about 2.5% to do this, some £ 822.
Heck, I could do better than this myself. The way I see it is that my money pays no more than if I took the 33k and invested it in a, say, 10 year bond.
At the end of the day, the annuity provider gets to pocket my/our 33k. A rip off if I ever saw one.
I know that I can withdraw 25% tax free.
What is my tax situation, and can I do any better?
Can I set up myself as an annuity provider ?
Kind regards,
Chris Griffiths.
email sigmaflo@terra.es

Comments

  • dunstonh
    dunstonh Posts: 116,031
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    If you took it out in 1983/84, its unlikely to be a personal pension fund as personal pensions were not around back then.   Its more likely a retirement annuity contract.   Personal Pensions pay out 25% but RACs usually pay 3 times the annual annuity.   Often, a retirement annuity contract will have a guaranteed annuity rate attached to it so you should get this confirmed from your current provider before you do any transfer.   Dont assume you get 25% as it currently stands as you may need to transfer it to a Personal pension to get 25%.  Also, if there are guaranteed annuity rates with the existing provider, you could end up with more than 25% tax free lump sum.

    Prudential do tend to come out quite well on annuity quotes although I have found that they often give less than their quotations if the existing provider doesnt transfer within their timescales.  Usually L&G come out very close to Pru and their annuity service is far superior and quicker.

    If the fund is £33k, then the insurance company will not be pocketing that as they will be paying a proportion back to you.

    If you are a smoker or have ill health, you can get much better rates.
    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.
  • The way I see it is that my money pays no more than if I took the 33k and invested it in a, say, 10 year bond.
    At the end of the day, the annuity provider gets to pocket my/our 33k.

    But you could live a lot longer than 10 years and you don't know what bond yield you would get in 10 years time. It could be less than what you get now.

    In order to compare the option of the bond portfolio with the annuity, you need to know when you're going to die and then buy bonds for that period.

    An annuity is insurance against old age - not an investment. Remember, that the annuity will pay out no matter how long you live. And at 66, your life expectancy is very, very good. More than it is for me, at 43 ;)
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • Pal
    Pal Posts: 2,076 Forumite
    Does the 6% quote include annual pension increases?
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