I have two modest private pension plans which, although I am not yet 65, I have decided to use to purchase an annuity. Every 6 months or so I have obtained a valuation of the plans and up until last June they were showing growth. The valuation I got in December showed that the value had declined and as I can see no increase in the stock market in the forseeable future ( although I may be wrong) I have decided to take the maximum tax free sum and draw an early pension.
When buying an annuity you are advised to "shop around" for the best deal. This is where the problems start. You cannot deal direct with the pension provider, you have to go through a Financial Consultant. To my knowledge there are none of these on Crete. A Google search lists a number of companies who will give an on-line quote and suggest that the pension from XYZ will be the best for you. They will then sell you that scheme and pocket their commission. However, all those that I have tried ask for a UK address and postcode. I live in Crete, I have no UK address. I have used my sons address to obtain a quote but when I telephoned the company to buy from them they refused to deal with me as I don't live in the UK. They quote money laundering regulations as the reason for this even though my plans are with a British company, I want to buy an annuity from a British co and I want the pension paid into a UK bank account.
The only way forward that I can see is to use my sons UK address. However I suspect that Norwich Union, who hold my pension funds, will not release the cash to the pension provider as they know that the address given is incorrect as they are aware that I live on Crete. I expect that they will quote "prevention of identity theft" regulations to with-hold the funds.
Any suggestions as to what I should do?
John
Trying to Purchase an Annuity
Well John, what can you do?
All of the answers are a disaster. I am 61 and my private pension which I took out years ago was a similar disaster. I was promised a lot but it never happened, as usual. So I took the annuity. Might as well.
The state pension which should come into effect in four years will help to keep life here on Crete. My wifes's pension is working now and helps a lot.
Ray
All of the answers are a disaster. I am 61 and my private pension which I took out years ago was a similar disaster. I was promised a lot but it never happened, as usual. So I took the annuity. Might as well.
The state pension which should come into effect in four years will help to keep life here on Crete. My wifes's pension is working now and helps a lot.
Ray
Are you sure you really want to buy an annuity, John. The rates at the moment are terrible. Once purchased there is no going back, although there are now limited term annuities available. If you die in a short period of time all the money is lost.
It is now possible to draw an income from your pension pot up to the age of 75. Take a real example. Suppose you had a pension pot of £100, 000. Suppose you and your wife are both 65. Suppose you take out a joint annuity, i.e. it pays out until the last one of you pegs it. Suppose you take a flat annuity, i.e. it never increases. About the best deal you can get today in that situation is £6,820 from Canada life. As a smoker you might do a little better but not a lot I suspect. Now instead put the £100,000 in an off shore savings account paying 5% interest and draw out £6,820 per year. By the time you are 74 your pot has reduced to £79,932. If you now buy an annuity on the same terms you would get £6,860, i.e. you are no worse off, assuming annuity rates don't get any worse. In that ten years you still have total control over your money, at least within legal requirements.
OK, there are many other possibilities but I think they all come out pretty much the same. For example, if you took out the annuity in a single name you would get a slightly bigger rate and so you would have to draw down a little more from your pot. In this annuity case, if you die first, however, your wife is left with nothing while in the investment case she at least gets whatever is left in the pot. If you take out an annuity that increases with RPI you would need to draw slightly more each year to match it but the original rate is lower so initially you would be drawing out less from your pot.
Incidentally this is a fairly conservative estimate. The best offshore rate at the moment is close to 7 %.
The investment route also involves paying less tax. In the annuity case the yearly payment is taxable. In the savings case only the interest is taxable.
If you do want an annuity the biggest players in the UK are:
http://www.annuity-bureau.co.uk/
http://www.annuitydirect.co.uk/
http://www.williamburrows.com/
I don't know if they will deal with you as non-UK resident but you could try.
Some accountants in Crete do act as financial advisers but I am not sure if they could deal with a UK annuity situation. Ours would not be convenient for you, because he is in Chania, but you could always ask him just as an example. See www.cretanaccountant.gr
Warwick
It is now possible to draw an income from your pension pot up to the age of 75. Take a real example. Suppose you had a pension pot of £100, 000. Suppose you and your wife are both 65. Suppose you take out a joint annuity, i.e. it pays out until the last one of you pegs it. Suppose you take a flat annuity, i.e. it never increases. About the best deal you can get today in that situation is £6,820 from Canada life. As a smoker you might do a little better but not a lot I suspect. Now instead put the £100,000 in an off shore savings account paying 5% interest and draw out £6,820 per year. By the time you are 74 your pot has reduced to £79,932. If you now buy an annuity on the same terms you would get £6,860, i.e. you are no worse off, assuming annuity rates don't get any worse. In that ten years you still have total control over your money, at least within legal requirements.
OK, there are many other possibilities but I think they all come out pretty much the same. For example, if you took out the annuity in a single name you would get a slightly bigger rate and so you would have to draw down a little more from your pot. In this annuity case, if you die first, however, your wife is left with nothing while in the investment case she at least gets whatever is left in the pot. If you take out an annuity that increases with RPI you would need to draw slightly more each year to match it but the original rate is lower so initially you would be drawing out less from your pot.
Incidentally this is a fairly conservative estimate. The best offshore rate at the moment is close to 7 %.
The investment route also involves paying less tax. In the annuity case the yearly payment is taxable. In the savings case only the interest is taxable.
If you do want an annuity the biggest players in the UK are:
http://www.annuity-bureau.co.uk/
http://www.annuitydirect.co.uk/
http://www.williamburrows.com/
I don't know if they will deal with you as non-UK resident but you could try.
Some accountants in Crete do act as financial advisers but I am not sure if they could deal with a UK annuity situation. Ours would not be convenient for you, because he is in Chania, but you could always ask him just as an example. See www.cretanaccountant.gr
Warwick
-
Retired in Crete
Kilkis wrote: Now instead put the £100,000 in an off shore savings account paying 5% interest and draw out £6,820 per year. By the time you are 74 your pot has reduced to £79,932. If you now buy an annuity on the same terms you would get £6,860, i.e. you are no worse off, assuming annuity rates don't get any worse. In that ten years you still have total control over your money, at least within legal requirements.
Warwick
Warwick,
Please, please prove me wrong but I have been advised that your suggestion is not possible.
I can take a tax free cash lump sum of 25% of my pension pot. I must then take the balance "as an open market option to purchase benefits from another pension provider. This payment cannot be made to you". (The quoted words are from Norwich Union,my pension pot holder.)
I cannot see how an offshore savings account can possibly be described as "another pension provider" and in effect the payment would be being made to me as I would have, in your words, total control over my money, and could draw it all out at any time.
Yes you can take "draw down" from your pension pot but, as far as I am aware, you cannot be that specific as to what your funds are invested in and draw down schemes spread their investments. (Mostly Government gilts, as I understand it)
Copied from Money Saving Expert forum on pensions:
Many investors who commenced drawdown contracts 5 years ago are still nursing substantial losses; these losses have prompted their drawdown providers to reduce their incomes. Don't forget: the individual investor does not have complete control over the amount of income s/he receives.
Draw down is also classified as "high risk".
As I said, please prove me wrong!
John
Hi John
I am not a financial expert so I may be completely wrong.
1 I had assumed that you could transfer the pot that exists with your current pension provider into a SIPP. Since SIPPs are run by pension providers I think this would fit within Norwich Union's definition of "purchasing benefits from another pension provider".
2 Once it was in a SIPP I believed, possibly wrongly, that you could then choose where you invested the money, obviously within some constraints. It looks like the limitations on what you can do within the SIPP may be more limited than I thought.
I have never looked into this in detail since it is not relevant to me. I currently draw a very small final salary pension and will draw a second, slightly larger, final salary pension when I am 65, assuming UK universities don't go bankrupt or wind up the scheme in the next 3 years. Sorry if I have mislead you, John. If you still want to investigate it further MoneySavingExpert is probably a good starting place, see http://www.moneysavingexpert.com/saving ... pps#invest and linked pages.
I think the High Risk description depends on circumstances. If it is your only pension and the money is left in shares, which can go down as well as up, and you need to draw out a certain amount each year to survive then it is very high risk. You only lose money on shares when they go down if you have to sell them, which you would need to do to take out your draw down. If, however, it is a secondary source of income to your main pension and you could delay draw down at any time when the financial performance is not so good then the risk is considerably reduced.
Warwick
I am not a financial expert so I may be completely wrong.
1 I had assumed that you could transfer the pot that exists with your current pension provider into a SIPP. Since SIPPs are run by pension providers I think this would fit within Norwich Union's definition of "purchasing benefits from another pension provider".
2 Once it was in a SIPP I believed, possibly wrongly, that you could then choose where you invested the money, obviously within some constraints. It looks like the limitations on what you can do within the SIPP may be more limited than I thought.
I have never looked into this in detail since it is not relevant to me. I currently draw a very small final salary pension and will draw a second, slightly larger, final salary pension when I am 65, assuming UK universities don't go bankrupt or wind up the scheme in the next 3 years. Sorry if I have mislead you, John. If you still want to investigate it further MoneySavingExpert is probably a good starting place, see http://www.moneysavingexpert.com/saving ... pps#invest and linked pages.
I think the High Risk description depends on circumstances. If it is your only pension and the money is left in shares, which can go down as well as up, and you need to draw out a certain amount each year to survive then it is very high risk. You only lose money on shares when they go down if you have to sell them, which you would need to do to take out your draw down. If, however, it is a secondary source of income to your main pension and you could delay draw down at any time when the financial performance is not so good then the risk is considerably reduced.
Warwick
pensions
Hello John,
I believe you will find that you must use the majority of your pension fund to purchase an annuity, which is is then used to provide you with an income. The 25% cash lump sum is your right to take which is the lower rate income tax incentive the goverment added to pension payments to stop the public living off the state.
I am afraid it is not possible to take all the pension fund and place those funds into a high interest account or offshore account. I have recently helped my wife to sort out her pension which we did through Canada Life uk. I actually sold the policy to my wife when I had a carreer change after leaving the Fire Service, so I know a little of what I speak.
You could try contacting
Tracy.King@canadalife.co.uk. who may be able to help with some advise options. Then do as Andy says have a beer
Paul
I believe you will find that you must use the majority of your pension fund to purchase an annuity, which is is then used to provide you with an income. The 25% cash lump sum is your right to take which is the lower rate income tax incentive the goverment added to pension payments to stop the public living off the state.
I am afraid it is not possible to take all the pension fund and place those funds into a high interest account or offshore account. I have recently helped my wife to sort out her pension which we did through Canada Life uk. I actually sold the policy to my wife when I had a carreer change after leaving the Fire Service, so I know a little of what I speak.
You could try contacting
Tracy.King@canadalife.co.uk. who may be able to help with some advise options. Then do as Andy says have a beer
Paul
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Retired in Crete
Warwick
I suspect that you are more correct than you think!
Yes, in theory, I could put my pension pot into a Self Invested Personal Pension (SIPP) which would enable me to choose where my cash was invested. In practise, as these have to be administered on a one-to-one basis the set up and management charges are high and, because of this, they will not consider setting one up for a pot of much less than £250,000.
Alas, my pot is somewhat less than this!
I have now discovered (thanks to dunstonh of MoneySavingExpert.com) why the UK company I tried to buy an annuity from would not deal with me. He told me:
"As from the 1st Nov 07 new rules came in regarding financial services. Companies now have Cross-border business, branching and passporting arrangements to deal with. That requires higher costs and a different level of regulation. It also means opting into MiFID regulation and that sky rockets the costs. So, the vast majority of UK IFAs no longer deal with ex pats. A number of providers have withdrawn as well on direct business to ex pats for the same reason."
However help is at hand. the IFA search site will now sort for IFAs opted into Mifid who will act for expats. (Thanks to EdInvestor, MoneySavingExpert.com)
http://www.unbiased.co.uk/find-an-ifa/default.asp
So I have now been able to locate and talk to co's who are happy to deal with non UK residents.
Having obtained a few quotes I have been playing with my calculator comparing flat rate annuities against index linked.
Flat rate annuities pay a higher rate but do not increase ever. Index linked pay a much lower starting rate but the amount paid will increase with inflation. My calculator tells me that it will take 8 years for the index linked paymen to match the flat rate one. It will be 16 years before the total cash recieved will be the same on both types. It will also be 16 years before I will have recieved my total pot cash (without any interest, the interest being the providers profit!). Strangely enough if you add 16 to the normal retirement age of 65 you get 81 which is the average lifespan of a UK born male. My conclusion from this: Take the flat rate as the cash will be worth more now than in 8 years time.
Warwick, I am sure that you were aware of most of the above. I have given the information for the benefit of other readers as I am sure that I am not the only person in this situation.
Thanks for your input.
John
I suspect that you are more correct than you think!
Yes, in theory, I could put my pension pot into a Self Invested Personal Pension (SIPP) which would enable me to choose where my cash was invested. In practise, as these have to be administered on a one-to-one basis the set up and management charges are high and, because of this, they will not consider setting one up for a pot of much less than £250,000.
Alas, my pot is somewhat less than this!
I have now discovered (thanks to dunstonh of MoneySavingExpert.com) why the UK company I tried to buy an annuity from would not deal with me. He told me:
"As from the 1st Nov 07 new rules came in regarding financial services. Companies now have Cross-border business, branching and passporting arrangements to deal with. That requires higher costs and a different level of regulation. It also means opting into MiFID regulation and that sky rockets the costs. So, the vast majority of UK IFAs no longer deal with ex pats. A number of providers have withdrawn as well on direct business to ex pats for the same reason."
However help is at hand. the IFA search site will now sort for IFAs opted into Mifid who will act for expats. (Thanks to EdInvestor, MoneySavingExpert.com)
http://www.unbiased.co.uk/find-an-ifa/default.asp
So I have now been able to locate and talk to co's who are happy to deal with non UK residents.
Having obtained a few quotes I have been playing with my calculator comparing flat rate annuities against index linked.
Flat rate annuities pay a higher rate but do not increase ever. Index linked pay a much lower starting rate but the amount paid will increase with inflation. My calculator tells me that it will take 8 years for the index linked paymen to match the flat rate one. It will be 16 years before the total cash recieved will be the same on both types. It will also be 16 years before I will have recieved my total pot cash (without any interest, the interest being the providers profit!). Strangely enough if you add 16 to the normal retirement age of 65 you get 81 which is the average lifespan of a UK born male. My conclusion from this: Take the flat rate as the cash will be worth more now than in 8 years time.
Warwick, I am sure that you were aware of most of the above. I have given the information for the benefit of other readers as I am sure that I am not the only person in this situation.
Thanks for your input.
John
John
This has been quite interesting and informative, although at the moment I've got 32 years to go before I hit 65 so not sure that it would be worth my while looking into something like this at this moment in time (if I can at all - I have a final salary pension that I paid into from January 1998 until May 2006 when I left. I also added about 4 years to it by transferring my previous works pension to it).
I'm not clued up on pensions etc I just know how much I'm likely to get when I retire!!
This has been quite interesting and informative, although at the moment I've got 32 years to go before I hit 65 so not sure that it would be worth my while looking into something like this at this moment in time (if I can at all - I have a final salary pension that I paid into from January 1998 until May 2006 when I left. I also added about 4 years to it by transferring my previous works pension to it).
I'm not clued up on pensions etc I just know how much I'm likely to get when I retire!!
Living in Crete!!
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Retired in Crete
Kilkis wrote:
As a smoker you might do a little better but not a lot I suspect.
Warwick
Warwick,
Sorry I didn't pick up on this point.
Some pension providers offer what they call "impared life" products to people with health problems on the basis that they can pay them a bigger pension because their life expectancy is shorter. Some, not all, will include smokers in this. From the quotes I have had so far the pension offerred to a smoker is some 30% higher than to a non smoker. This, of course, is subject to a written declaration that I have smoked a minimum of 20 cigarettes a day for the past 10 years and this must be confirmed by my doctor. (So no problem there!)
John
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