Do I have to buy an annuity?

[bond]

I have paid, and still pay into a pension through my company. I pay 7.5% of my gross salary and my employer matches it, so 15% in total. Do I have to buy an annuity at age 55 by law (the minimum age I can access the fund, and when I would like to retire) or can I take a draw down? I see so many rubbish annuity tables and can't see them getting better, but very few draw down tables, or does it specifically depend on the type of fund I have?

[ubasses]

You really need independent financial advice. From last year you no longer need to buy an annuity by 77, but you will have to meet minimum income requirements (I think 20k per year) from your fund to ensure you do not run out of pension income during your lifetime. So a lot will depend on the size of your pension pot at retirement. Unless it is very large an annuity will still be the only way of receiving a guaranteed income for life.

[solvitquick]

It's a pity you are not in a final salary scheme as opposed to your average salary scheme but that's your employer's decision. The best people talk to is your employer. When my father died, my mother had to buy an annuity but she was able to draw down enough to pay off the house mortgage. However that was long ago - 3-bed bungalow costing £3,600 you see how long ago! Advise you stay in job if poss. Long time before state pension.

[EDDIE51]

As far as I know you do not have to buy the annuity until you want to draw from your pension, and then you can choose who to buy it from. You can take 25% of your pot as a cash lump sum instead of using it all for a pension.

[bond]

Hi thank you so far. I don't really understand the last two answers, but "ubasses" I understand yours - do you know where I can find that minimum requirement, and does that include any state pension (as long as it still exists!). It seems that an annuity assumes I will live to a certain great age, but I know/think I will die younger than what that says, therefore I want more of my pension money sooner and quicker when I choose to retire. Regards.

[Nibble]

I went to see an independent financial adviser when my AVC matured a couple of years back - for my circumstances they recommended an annuity, but you really need to see someone yourself.

[solvitquick]

I agree with ubasses, but why not get facts from employer. Never heard of large annuity at 55 yrs. Many unknowns here: whether you own your house (still requiring upkeep cost). When you get some hard facts as to likely annuity, assume you are going to live to 80-100 years and if you can live on it. 55? doubt if your Nat Insrance payments will give you max State Pension (49 yrs contribs for man). Current Savings? Sorry, good luck xx

[solvitquick]

Aaaaww! Now you reveal your health problem(s) I apologise for my phrase "assume you live to 80/100 years" but hope you still do.

[ubasses]

I am sure the minimum income includes the state pension. I assume from whatyou say you have a life limiting condition, this would be taken into account and increase any payment from an annuity. The advantage from drawdown is that anything remaining would form part of your estate but the hard part is judging how much to take as when the markets are not performing you will be drawing from the capital. An appointment with an expert will certainly be worthwhile.

[solvitquick]

FINALLY: bond, final salary scheme does not incude buying an annuity but your pension is paid from your employer's pension fund if that is why you did not understand my answer. Take care of yourself dear bond but do nothing impetuous xx

[dzug2]

There are such things as impaired health annuities which pay higher rates. If you really have a health problem (rather than just fear you have) they may be worth looking at.

You'll need to persuade the annuity provider's tame doctor.

[EDDIE51]

You can only take 25% as a cash lump sum the rest has to be used to provide a pension. There is an exception for very small pension pots up to £18,000 where you can withdraw the entire amount but I do not think that will apply to you. Pension providers depend on the fact that some people will live less time than others to make a profit.
I remember one guy I worked with , he had been boasting about his pension for years and how he had put extra cash into it and how much it was going to be worth. He retired but lasted just 3 months before 'popping his clogs'

[ubasses]

It depends on whether bond has a defined benefits or defined contributions scheme. If the latter he does not have to accept the annuity provided by his employer. Even with defined benefits some schemes will provide a quote for the value of the pension which can be taken elswhere. My scheme did this but my colleague, who enquired, decided it was not to his avantage

[bond]

Thanks, so many answers and some are divulging, but I understand you all care. My concern is that I will have a pot of say 100,000 (after taking a 25% lump sum) so with an annuity im getting say 5200 per annum but if I only live 15 years from when I take this (=78,000), I have lost a lot of money, therefore I want to avoid the annuity. I apologise for not understanding this better. Thanks.

[factor-fiction]

... but if you live for 40 years you'll get over £200,000.
That's a major problem with pensions planning- we usually don't know the key factor in the calculation

[bond]

Being born in 1971 and with my lifestyle (and looking at various websites about my expected death age), I don't anticipate living beyond 70.

[twix123]

You need to see an IFA for proper advice, but solvit is incorrect in that now you only need 30 years NI contributions to qualify for a full state pension, but you currently cannot draw it until you are at least 65 (assuming that you are a male) although this age will be increased eventually.

If you are contemplating Income Drawdown, you need to have accumulated a substantial pension pot, but again an IFA may be able to provide you with indicative figures.

[twix123]

Having just read the legislation regarding income drawdown, you can only draw from 0% to 100% of the equivalent income that you would have received from an annuity. As the costs of running these schemes is greater than a normal pension, the rates paid out are slightly lower. The legislation has been framed in such a way to ensure that you don't run out of money before you die. Income drawdown is normally only viable if you have other sources of income, such as a part time job or substantial investment income.

[ubasses]

i have just seen your post with DOB. You are only 41, with 14 years until you reach the current minimum retirement age I really would not stress yourself out at the moment. As long as you are preparing for your retirement by making pension provision which you seem to be doing there is not a lot more you can do at the moment. In the next 14 years as I have no doubt that there will be many changes to the rules on pensions and reirement age, annuity rates could have increased substantially by then as well. To be honest a pension pot of £100,000 is a bit low to be considering drawdown, especially as you could live way beyond your predictions.
It is certainly wise to review your sutuation at regular intervals, but as I said too early to get yourself stressed about it.

[factor-fiction]

I agree with ubasses now that we know your age.
And please do not be tempted by any of those companies who claim to offer a way of releasing your pension pot before you reach 55. You may lose almost everything.