Annuity bought with cash savings??

[Howardh]

Can anyone help? I have two pensions sorted, first from a former job which I'm getting now, and the second will be my state pension. I was hoping to use my current savings to buy a cash annuity with a lump sum taken from my savings as a third pension.

Has anyone done this, is it indeed possible (?), and if so which providers, and did you go through an advisor?

Years ago this wasn't possible I think, but recently isn't it allowed with "pensions freedom"?

Thanks for any repies, might not be able to answer this afternoon as I'm out all day, but this has been on my mind!!

 

[oxfordray1]

I believe it may be possible. But you need to be careful that you do not create taxable income (which annuities are) from savings which may be protected from tax (if in an ISA for example).

 

[Howardh]

I believe it may be possible. But you need to be careful that you do not create taxable income (which annuities are) from savings which may be protected from tax (if in an ISA for example).

Thanks, yes I have thought of that, the problem with savings (interest) is that even the best ISA's fall way below standard interest rates (mine is 1.7% compared to a 2.7% bond with another provider so the bond, after tax, has an equivalent rate of 2.2%) so any tax savings are wiped out by the low rates. Yes, it loks like a con! Better to pay 20% on a bond that gives a much better return?!

My main worry is that nowadays inflation will eat away at the capital, and an annuity option would be to go with the RPI rises to cover that.

 

[DarloRich]

i think securing the services of an Independent Financial Advisor would be sensible.

 

[Howardh]

i think securing the services of an Independent Financial Advisor would be sensible.

I have one lined up, dunno what the cost is and how "independent" they are! But spoke to one uyesterday via "pensionwise" (the government agency) and I asked about taking a cash annuity and he gave me a straight "no, that can't be done".

 

[ainsworth74]

I have one lined up, dunno what the cost is and how "independent" they are!

I would suggest checking in advance. I believe most these days work on the basis that their initial advice is free and they recoup their costs via you paying them a percentage of whatever product you buy/invest (if you invest £100,000 in a product they've advised you to then you might pay 1% of that to them as their fee for instance). Other times it's on a fixed fee per service (i.e. advice on this subject costs £x, advice on this costs £y). Occasionally it's hourly rate but I think that's quite unusual. Best to ring and ask though usually to avoid an unexpected bill! As for independence I would ask if they're free to advise on the whole market or if they're restricted. You want one that's free to advise on the whole market rather than tied to certain providers or similar. You should also check the FCA register to make sure that they're registered. That help to make sure that they're at least somewhat competent.

Unbiased.co.uk is typically a good resource for finding IFAs by the by.

 

[Howardh]

I would suggest checking in advance. I believe most these days work on the basis that their initial advice is free and they recoup their costs via you paying them a percentage of whatever product you buy/invest (if you invest £100,000 in a product they've advised you to then you might pay 1% of that to them as their fee for instance). Other times it's on a fixed fee per service (i.e. advice on this subject costs £x, advice on this costs £y). Occasionally it's hourly rate but I think that's quite unusual. Best to ring and ask though usually to avoid an unexpected bill! As for independence I would ask if they're free to advise on the whole market or if they're restricted. You want one that's free to advise on the whole market rather than tied to certain providers or similar. You should also check the FCA register to make sure that they're registered. That help to make sure that they're at least somewhat competent.

Unbiased.co.uk is typically a good resource for finding IFAs by the by.

Thanks!

An advisor is ringing me back tomorrow - his office is just around the corner. A grand per every £100k for organising a transaction looks a bit steep, but might be worth it if they can get the best deal and I can put this worry to bed!

 

[rcro]

I may be misunderstanding - are you wanting to purchase an annuity with savings that have already been subject to income tax, rather than from a pension pot (where income tax has not yet been charged)?

If so, yes, you can. Generally called a “life annuity” due to different tax treatment. Most annuity providers offer them, but as suggested above, you really need advice as to whether this is better value to you than other savings/investment options and drawing down.

 

[Howardh]

I may be misunderstanding - are you wanting to purchase an annuity with savings that have already been subject to income tax, rather than from a pension pot (where income tax has not yet been charged)?

If so, yes, you can. Generally called a “life annuity” due to different tax treatment. Most annuity providers offer them, but as suggested above, you really need advice as to whether this is better value to you than other savings/investment options and drawing down.

Yes, these are savings which have been in the bank/building society over my lifetime, and no relation to a pension pot.

 

[Broucek]

I may be misunderstanding - are you wanting to purchase an annuity with savings that have already been subject to income tax, rather than from a pension pot (where income tax has not yet been charged)?

If so, yes, you can. Generally called a “life annuity” due to different tax treatment. Most annuity providers offer them, but as suggested above, you really need advice as to whether this is better value to you than other savings/investment options and drawing down.

This is correct

 

[Dai Corner]

Yes, these are savings which have been in the bank/building society over my lifetime, and no relation to a pension pot.

That will make the contract a 'purchased life annuity' (PLA). I used to calculate quotes for these back in the 1980s when I worked for a life assurance and pensions company. Basically you're making a bet with the provider that you will live longer than they think you will.

There are various options such as payments increasing at a fixed rate per annum and/or a minimum of five or ten years' payments even if you die earlier.

If you're in poor health you may be able to get better rates.

I can't vouch for this company at all, but their page gives a good explanation.

Purchase Life Annuities

A Purchase Life Annuity (PLA) works in a very similar way to a Lifetime Annuity, in that it provides a guaranteed income for the rest of your life, and various options, including indexation, guarantee periods, spouse’s pensions can included as they can with a traditional Annuity. There are howeve

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