Annuities
Hi geoff, a few months ago annuity rates hit their peak but have now started to fall, along with interest rates. Other indicators suggest that the UK's economy is heading for a full-blown recession, so getting an annuity now rather than later is a wise move. However, I suggest speaking to an independent financial adviser to work out your options. Remember that you don't have to buy an annuity from your current pension provider, called the open market option, so it's vital shop around. It's going to be your income for the rest of your life, so make sure you have got the best deal you can. And finally, it can take a couple of months to get all the paperwork done and funds transferred, so start hunting now.
Thu, 06/11/2008 - 13:59
- Login or register to post comments
- report as spam
Hi Geoff - Lavaberry is right, annuity rates do appear to have hit their peak and are expeced to fall.
According to Hargreaves Lansdown, an IFA, annuity rates could actually fall by 10% over the next 12 months. For a 65 year old man with £100,000 pension pot, this could leave him £15,000 worse off throughout his retirement.
In addition, the fact that people are living longer is slowly driving down prices. Insurers have started to look at where you live (known as postcode pricing) to get an idea of your wealth and, therefore, your life expectancy. At the moment the difference between the traditional annuity rates and "postcode" annuity rates isn't too big, but pension experts have told me they expect this gap to widen down the line.
You therefore have a few choices - you could buy an annuity now and get an income for life when rates are still at a six-year high (remembering to shop around first of course) or you can think about opting for income drawdown or even a flexible annuity. If you smoke or have a medical condition you could also boost your retirement income by going for an enhanced annuity.
You can find out more about your options by reading this article: "How to make your pension pot work for you."
It's a big decision to make, and one you can't reverse, so you should also consider speaking to an IFA about your options. If you don't have an IFA, IFApromotions offers a free service you can use called to find one in your area. Just click on the link and enter your postcode, and it will list local firms.
Thu, 06/11/2008 - 17:48
- Login or register to post comments
- report as spam
Geoff's question is interesting and is a course I hadn't even considered. How would this work for someone, age 64, working, with the prospect of having to continue working post 65 because of the general economic outlook? A week is a long time in politics! What can happen in a year?
- If I took an annuity now would I get clobbered with tax on the two incomes - wages and pension?
- Would taking an annuity 'close the account' and preclude me from making further contributions to my employer's scheme?
- If not, would there be any point, as so little would be paid in over one year. Doubly important in Geoff's case as he is only 60. Still in employment? Retiring at 60?
- Would it be better to continue paying into my pension pots to accrue a higher fund and take a view on retirement based on the economic climate in a year's time, and hopefully the start of a rapid recovery?
There have been many times in the past where I have had occasion to say "Interesting times lie ahead". This seems to be another one. Recessions and wars always rear their ugly heads. Why can't they learn from past experience?
Sat, 08/11/2008 - 15:54
- Login or register to post comments
- report as spam
We have a endowment with profits policy which is due to end Jan 2010
Would it be wise to surrender now as the company shares are falling
each week and we have heard other Insurers are withdarwing final bonus
husband does not have work pension and this is our retirement funds
would appreciate advice on this
Sun, 09/11/2008 - 12:23
- Login or register to post comments
- report as spam
Many of these policies include a 'Terminal Bonus', It therefore seems unlikely that early encashment is a good idea. [Especially at a very late stage.]
Others forced to encash policies early might find it pays NOT to cash the policy to the company but to Sell it on the open market.
What the effects recent events have had can only be judged by a 'Suck it & See' Approach.
Early Surrender is rarely [If Ever] a good Idea.
Fri, 14/11/2008 - 22:33
- Login or register to post comments
- report as spam
21 Years of helping with your finances
Editor's Picks
Vote now on our poll
Hello everybody
I will very shortly be 60 year old and I am considering buying an annuity then, rather than waiting, I think we all know that interest rates are now going lower and I feel that annuities will follow. Also when interest rates eventually rise again maybe Annuities will not follow so much as people are living longer.
I would like the views of other Moneywise members.
regards,
geoff