Buying Annuity

Almost certainly your pension plan is split into several miniplans. If this is the case, then you could take some miniplans to an annuity provider, get that provider to pay the tax-free cash and an annuity, and take the rest to another annuity provider and do the same thing.

The proviso here is that although you are unlikely to get a lower annuity because of a lower fund value (proportionately, I mean) you may hit the minimum purchase amount required by some providers. Prudential need 30K I think, for example.

I have some doubts about whether an index-linked annuity is a good idea. Have you worked out how long the annuity would take to reach the amount you'd get if it were level? Probably about 12 years. Then another 12 to make good that deficit. If you got a level one you could put the extra in another investment of some sort and use it to fund your real old age.

You need to consult an IFA, I feel. You'll probably say that his commission will deplete your annuity. Just try to do it yourself and then make the comparison.

Rob Graham

Rob's answered your question but to add my 4p worth.

Be aware of financial advisors charging you more than the work is worth eg by taking commission of 3% of the fund. Get a written agreement that all incentive payments are rebated and you pay a fixed fee of £n. The RPI vs. level calculation should be simple - I've done them.

Unless you are a spendthrift, I'd aim to get the maximum out of the (restrictive) pension as quickly as possible. Allow yourself to spend only at the rate of the RPI linked annuty and invest the rest in ISAs. This allows you to regain control of your money from the insurance company and the government. At long run historic equity/property growth rates of 5% over inflation, the RPI linked annuity would need ~83 years to catch up with the level payments plus the savings even allowing for the savings to be plundered after 16 years to maintain the RPI linked payments. I could probably put my spreadsheet online somewhere if you like.

To do this you'd need to look at a level annuity or income drawdown. Post 75 you'd need to look at an Alternatively Secured Pension (ASP) although as it pays a maximum of 90% of the level rate annuity recalculated every year it is only of benefit if you wish your estate to benefit from the remaining pension after your death (although I believe that this is heavily taxed ? see TPAS)

The Pensions Advisory Service are superb, see -

More general links -

Daytona

Many thanks to both of you - just what I was looking for.

Regards

Here's the spreadsheet (E&OE) that you can download - you can change the values in C8:C12 to suit your own requirements.

Daytona

That's great - thanks