Can i buy an annuity with non pension money?
Discussion
Available from either Aviva or Canada Life. Aviva has to be advised but generally has better rates and you must be at least 55. Canada Life the minimum age for an annuitant is 35. Aviva will only go up to a 10yr guarantee period or 100% value protection but Canada Life will go up to 30yrs. Those are death benefits beyond the annuity income for you/partner though so perhaps less important.
They are taxed differently. The majority is deemed to be a return of your original capital and this element is not subject to income tax. The interest part is subject to income tax. Can be held jointly if you want to split the tax. Means that for a typical couple in their early 60s paying basic rate tax the effective tax rate is normally under 10%.
And no you can't just put a whole load of money in pension if you don't have the earnings to support a large contribution. Plus, the net rate often works out better on a Purchased Life Annuity than a pension one which is all taxable.
They are taxed differently. The majority is deemed to be a return of your original capital and this element is not subject to income tax. The interest part is subject to income tax. Can be held jointly if you want to split the tax. Means that for a typical couple in their early 60s paying basic rate tax the effective tax rate is normally under 10%.
And no you can't just put a whole load of money in pension if you don't have the earnings to support a large contribution. Plus, the net rate often works out better on a Purchased Life Annuity than a pension one which is all taxable.
PistonHead007 said:
Available from either Aviva or Canada Life. Aviva has to be advised but generally has better rates and you must be at least 55. Canada Life the minimum age for an annuitant is 35. Aviva will only go up to a 10yr guarantee period or 100% value protection but Canada Life will go up to 30yrs. Those are death benefits beyond the annuity income for you/partner though so perhaps less important.
They are taxed differently. The majority is deemed to be a return of your original capital and this element is not subject to income tax. The interest part is subject to income tax. Can be held jointly if you want to split the tax. Means that for a typical couple in their early 60s paying basic rate tax the effective tax rate is normally under 10%.
And no you can't just put a whole load of money in pension if you don't have the earnings to support a large contribution. Plus, the net rate often works out better on a Purchased Life Annuity than a pension one which is all taxable.
Thanks.They are taxed differently. The majority is deemed to be a return of your original capital and this element is not subject to income tax. The interest part is subject to income tax. Can be held jointly if you want to split the tax. Means that for a typical couple in their early 60s paying basic rate tax the effective tax rate is normally under 10%.
And no you can't just put a whole load of money in pension if you don't have the earnings to support a large contribution. Plus, the net rate often works out better on a Purchased Life Annuity than a pension one which is all taxable.
so i have to choose a fixed term, rather than for life.
That's a shame.
No, they are for life.
A guarantee period is purely an underpin. If it was single life with a 10 year guarantee then if you died before 10yrs it would still payout until the end of the initial 10yr timescale. It would always pay you as long as you live. If you outlive the guarantee period then the money stops when you die.
You don't need any guarantee period if you don't want it, although up to a point they are very low cost as your life expectancy has already been built into the rate.
A guarantee period is purely an underpin. If it was single life with a 10 year guarantee then if you died before 10yrs it would still payout until the end of the initial 10yr timescale. It would always pay you as long as you live. If you outlive the guarantee period then the money stops when you die.
You don't need any guarantee period if you don't want it, although up to a point they are very low cost as your life expectancy has already been built into the rate.
PistonHead007 said:
No, they are for life.
A guarantee period is purely an underpin. If it was single life with a 10 year guarantee then if you died before 10yrs it would still payout until the end of the initial 10yr timescale. It would always pay you as long as you live. If you outlive the guarantee period then the money stops when you die.
You don't need any guarantee period if you don't want it, although up to a point they are very low cost as your life expectancy has already been built into the rate.
Ah ok.A guarantee period is purely an underpin. If it was single life with a 10 year guarantee then if you died before 10yrs it would still payout until the end of the initial 10yr timescale. It would always pay you as long as you live. If you outlive the guarantee period then the money stops when you die.
You don't need any guarantee period if you don't want it, although up to a point they are very low cost as your life expectancy has already been built into the rate.
i understand now. Thanks.
Are they definitely the only 2 companies or just 2 that you know of?
I suppose rates wont be great if I'm 65 and my partner for joint life is only 57.
Thanks again.
That's it, limited market.
Probably around 5.5% for a level one. You can have fixed escalation but the pay off period is long. Typically around 10-15yrs until the annual payment catches up and close to 30yrs before the total cumulative payment catches up.
Probably around 5.5% for a level one. You can have fixed escalation but the pay off period is long. Typically around 10-15yrs until the annual payment catches up and close to 30yrs before the total cumulative payment catches up.
Edited by PistonHead007 on Monday 9th September 12:21
PistonHead007 said:
That's it, limited market.
Probably around 5.5% for a level one. You can have fixed escalation but the pay off period is long. Typically around 10-15yrs until the annual payment catches up and close to 30yrs before the total cumulative payment catches up.
Thanks again.Probably around 5.5% for a level one. You can have fixed escalation but the pay off period is long. Typically around 10-15yrs until the annual payment catches up and close to 30yrs before the total cumulative payment catches up.
Edited by PistonHead007 on Monday 9th September 12:21
You've been very helpful.
TownIdiot said:
Can I ask why someone would want to do this rather than drawdown on their investment/savings?
Is it an IHT strategy?
I thought an annuity would be the safest way to get a guaranteed income from a lump sum.Is it an IHT strategy?
I don't want to make ongoing investment decisions myself as it is for retirement and cant afford to mess it up/make bad decisions.
You can spend at a rate faster than just drawing off the cash interest. Whilst you could draw some capital out of cash on top of interest, that strategy then goes into a downwards depleting spiral with a very real risk the pot runs out. With an annuity you've handed over the longevity risk to the insurer so you're free to enjoy it knowing it won't run out. Also, cash interest rates vary and if they go low it will impact what you can take. Locking into a annuity now is at relatively good rates and that's for life.
If you compare a 5.5% annuity rate on £100,000 with living 30yrs and spending down a pot by taking interest plus enough capital to keep drawing £5.5kpa then you need a cash interest rate of circa 3.5%. Not unreasonable but more risky and also at 30yrs all the money is gone, where the annuity would keep paying.
As far as IHT goes it can have some benefits. You're exchanging a lump of capital for a lifetime income so that capital is then no longer sat around potentially subject to IHT. Consequently it may allow you to spend less elsewhere like out of pension monies and/or be able to afford to give more away because you have that certain income stream.
If you compare a 5.5% annuity rate on £100,000 with living 30yrs and spending down a pot by taking interest plus enough capital to keep drawing £5.5kpa then you need a cash interest rate of circa 3.5%. Not unreasonable but more risky and also at 30yrs all the money is gone, where the annuity would keep paying.
As far as IHT goes it can have some benefits. You're exchanging a lump of capital for a lifetime income so that capital is then no longer sat around potentially subject to IHT. Consequently it may allow you to spend less elsewhere like out of pension monies and/or be able to afford to give more away because you have that certain income stream.
Edited by PistonHead007 on Monday 9th September 13:03
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