Drawdown v Annuity - Nice first world problem!!

[scrumpyjack]

I can't see any reason to worry about tax on inherited SIPPs, after all the contributions that built them up were out of gross income and then one got the freebie of the 25% TFLS. One can hardly object that income tax will then be payable on withdrawals from the inherited fund and the beneficiary has control over when to withdraw/be taxed. The inherited SIPP does not count towards the LTA (ok abolished for now, but likely to be reintroduced).

Most of us, I suspect, have children / grandchildren who have not been able to build up much of a pot, so leaving them a ready made pot gives them more security in their old age, if they are sensible enough to leave it alone until then. This benefits the state in that those recipients will be less likely to need state handouts.

In view of all the above it was a no-brainer for me to go drawdown, not annuity

[Myfyr]

With RPI annuity rates around the same level (or perhaps better) than drawdown safe withdrawal rates they are worthy of serious consideration. The issue of inheritance does seem to worry some but most retirees will be leaving a valuable property for their heirs.

A guaranteed income also overcomes one of the biggest financial problems in retirement which is under-spending due to fear of exhausting savings - I also vaguely remember some research that shows retirees with guaranteed income are happier than those who rely on investment income (Wade Pfau I think).

Retirement with a > 3.5% guaranteed rpi annuity is easier than a drawdown of of the same level as sequence risk is eliminated. Less low hanging fruit for a government to pilfer too!

[hiriskpaul]

Did you go with Just Annuities in the end? If so how much commission did they charge? Also, did HL charge an admin fee?

[Myfyr]

Did you go with Just Annuities in the end? If so how much commission did they charge? Also, did HL charge an admin fee?

Yes, Just were the best quote by about 5% - 10% and I went with them. Standard Life was the outlier at a massive 15% less.

Hargreaves didnt charge me anything but Just paid them 0.8% of the purchase money as commission.

The annuity purchase process could have been better. My GP took 10 weeks to produce my medical report and that was only after I complained about the delay.

I then ran my annuity quote with no medical details and the Just quote was unchanged (other providers were lower) - so the GP delay was unnecessary after all for the Just annuity!

My annuity would be 6% lower today so I took it at the best time (for now).

[hiriskpaul]

Did you go with Just Annuities in the end? If so how much commission did they charge? Also, did HL charge an admin fee?

Yes, Just were the best quote by about 5% - 10% and I went with them. Standard Life was the outlier at a massive 15% less.

Hargreaves didnt charge me anything but Just paid them 0.8% of the purchase money as commission.

The annuity purchase process could have been better. My GP took 10 weeks to produce my medical report and that was only after I complained about the delay.

I then ran my annuity quote with no medical details and the Just quote was unchanged (other providers were lower) - so the GP delay was unnecessary after all for the Just annuity!

My annuity would be 6% lower today so I took it at the best time (for now).

Oh OK, so you used the HL annuity service then. Did you look into going directly to Just, or using another annuity provider service? I was just wondering whether there is anything to be gained by shopping around?

[Myfyr]

Yes, Just were the best quote by about 5% - 10% and I went with them. Standard Life was the outlier at a massive 15% less.

Hargreaves didnt charge me anything but Just paid them 0.8% of the purchase money as commission.

The annuity purchase process could have been better. My GP took 10 weeks to produce my medical report and that was only after I complained about the delay.

I then ran my annuity quote with no medical details and the Just quote was unchanged (other providers were lower) - so the GP delay was unnecessary after all for the Just annuity!

My annuity would be 6% lower today so I took it at the best time (for now).

Oh OK, so you used the HL annuity service then. Did you look into going directly to Just, or using another annuity provider service? I was just wondering whether there is anything to be gained by shopping around?

Maybe an IFA could have been cheaper / got a better rate.

However I was running annuity quotes daily using Hargreaves and pounced when it came up with an annual annuity that I was happy with.

Hargreaves sent the money three times to Just but the first two times it bounced back as they put the wrong reference number on it.

This delay meant I hit a better annuity sweet spot and improved my annuity by 2% due to bond rate changes as Just apply the annuity rate in force on the day they get the money (if the rate is better).

Didn’t think about going to the provider directly. Not sure if this is possible with annuities. Anyway it’s done now. The remaining 33% of my SIPP will be drawdown as and when needed. It won’t be annuitised.

[hiriskpaul]

Oh OK, so you used the HL annuity service then. Did you look into going directly to Just, or using another annuity provider service? I was just wondering whether there is anything to be gained by shopping around?

Maybe an IFA could have been cheaper / got a better rate.

However I was running annuity quotes daily using Hargreaves and pounced when it came up with an annual annuity that I was happy with.

Hargreaves sent the money three times to Just but the first two times it bounced back as they put the wrong reference number on it.

This delay meant I hit a better annuity sweet spot and improved my annuity by 2% due to bond rate changes as Just apply the annuity rate in force on the day they get the money (if the rate is better).

Didn’t think about going to the provider directly. Not sure if this is possible with annuities. Anyway it’s done now. The remaining 33% of my SIPP will be drawdown as and when needed. It won’t be annuitised.

Very interesting thanks. I like the idea of regularly applying until a good rate comes along. Annuities very tempting right now. Decent rates and price of equity investments near or over all time highs as well. No LTA charge at present either.