Any Whizz kids who know about pensions and annuities.

[conny]

As the title says, are there any whizz kids, (or old fogeys), on here who know about pensions and annuities?

I am in the middle of 'cashing in' 2 very small pensions and thinking of buying an annuity. Total value to put in is around £12k
I'll be 66 next week, am a life long smoker and have had CKD for the past 15-16 years.
Two 'illustrations' I have received today show a 'pension' of between £31 and £35 per month, £421 yearly and £4,717 over 10 years.
Does this seem right to those in the know? If it does then it means I need to live till I'm about 95 just to break even with my 12k
By the time you take inflation into account I'll be lucky to afford a loaf of bread with a months payment!

 

[Doug99]

All I know is a pension can rise with inflation (eg state pension), but an annuity is fixed for life.

 

[Ihavenojob]

As the title says, are there any whizz kids, (or old fogeys), on here who know about pensions and annuities?

I am in the middle of 'cashing in' 2 very small pensions and thinking of buying an annuity. Total value to put in is around £12k
I'll be 66 next week, am a life long smoker and have had CKD for the past 15-16 years.
Two 'illustrations' I have received today show a 'pension' of between £31 and £35 per month, £421 yearly and £4,717 over 10 years.
Does this seem right to those in the know? If it does then it means I need to live till I'm about 95 just to break even with my 12k
By the time you take inflation into account I'll be lucky to afford a loaf of bread with a months payment!

Can you sell it on? May be tax implications if you do.

 

[charliegolf]

First online page

Retirement income calculator

Use our retirement income calculator to calculate how much income you might be able to get in retirement from using your pension pot.

www.legalandgeneral.com

£445 per year.

 

[crystal ball]

Similar position to you, got a pension pot currently earning 8%, I don't expect to live a long life so looking at draw down in dribs & drabs to avoid higher tax band, my thoughts are cash in and blow it on holidays, then snuff it

 

[conny]

First online page

Retirement income calculator

Use our retirement income calculator to calculate how much income you might be able to get in retirement from using your pension pot.

www.legalandgeneral.com

£445 per year.

Thanks for the link Charlie.
As I've already had my 25% lump I'm left with 12k for an annuity. This calculates I could get £620 p.a. without taking any health risks into consideration. Certainly better than the ones off Aviva and Scottish Widows.

 

[conny]

Similar position to you, got a pension pot currently earning 8%, I don't expect to live a long life so looking at draw down in dribs & drabs to avoid higher tax band, my thoughts are cash in and blow it on holidays, then snuff it

These are old deferred company ones and they are actually costing me money in charges instead of getting interest added.

 

[charliegolf]

Thanks for the link Charlie.
As I've already had my 25% lump I'm left with 12k for an annuity. This calculates I could get £620 p.a. without taking any health risks into consideration. Certainly better than the ones off Aviva and Scottish Widows.

Conny, ironically, ill health is 'good' in your position. The actuaries figure you'll die sooner than the average! You could get more.

 

[Mottie]

Buy £12k of premium bonds, take £500 per year out for the next 24 years. You might even win something!

 

[Dork Lard]

Nothing, absolutely NOTHING, excites a forum as much as offerring advice on a subject that is well above its pay grade.

 

[JohnD]

I am in the middle of 'cashing in' 2 very small pensions and thinking of buying an annuity. Total value to put in is around £12k

very unlikely to be a good move.

Will you have to pay tax on what you take out?

have you signed the forms yet?

are you using an intermediary who takes a cut? are there any charges?

have you got any other pension schemes?

 

[Trazor]

Nothing, absolutely NOTHING, excites a forum as much as offerring advice on a subject that is well above its pay grade.

Thank God then, that you have contributed nothing.

 

[JohnD]

I have a small SIPP which I built by moving in several old and smallish pensions from the past.

By good fortune it has grown at an annual average rate of about 9% since I set it up (however 8% is said to be about the typical rate for pension schemes) and I draw around 4% pa. as income. This is said to be the amount you can draw from a typical mixed portfolio without depleting it. i.e. with good luck you could draw 4% a year for ever and it would never run out.

I set the amount so that added to my state pension, I get a regular taxable pension income of £12,570 p.a. This number is significant

if you have £12k to invest, you could set up your own annuity-equivalent by investing it so it would have a fair chance of growing, and divide the current value of the fund by the number of years you have left. if the fund happens to grow by more than 4%, it will keep getting biger and you can increase the income each year.

for example if you think you have 20 years left, divide it by 20 and draw 5% of the value this year. next year divide it by 19, and so on.

if you happen to peg out earlier there will be a bit left over you can leave to the cats home, or your loved ones if any.

if you happen to live to 120, or have a run of bad luck, you will run out.

If you honestly think you will live to 120, you should expect to make a handsome profit out of the annuity provider, who expected you to die sooner.

 

[JohnD]

Nothing, absolutely NOTHING, excites a forum as much as offerring advice on a subject that is well above its pay grade.

i'm sure the dork will tell us that he has been close personal friends with the last ten chancellors, and advised them how to design pension law.

 

[Dork Lard]

Thank God then, that you have contributed nothing.

Mostly because I don't mess about with other peoples pensions.

You can if you want, but please be aware that messing around with other peoples pensions is best done by people who actually know about what is a very complicated subject.