Buying an Annuity with AVC Funds

Hawkey99 · Post by **Hawkey99** » 27 Sep 2020, 21:37

Just taken the below from the AVC sheet and wondered if anybody knows anything about buying an Annuity, rates, cost, who with etc...

"At the point at which pension bene ts are taken, most people use all of the money from their AVC account to provide a larger cash lump sum (subject to
certain HMRC limits). Alternatively, you could use some or all of your AVC account to buy an annuity (a pension), which will provide an income for the rest of your life. The amount of income you will receive from an annuity will depend on your age, health, sex, the type of pension income you choose and the annuity rates available (the rate at which your AVC account is converted to a pension) at the time you take your benefits"

Might be an option for me to consider rather than pay a shed load of tax ......

Post by **RobertT** » 28 Sep 2020, 04:37

I think Hargreaves Lansdown are RM's preferred annuity provider, but you can transfer out to any other pension company of your choice.

Bear in mind that once any tax free lump sum has been taken, the income you receive from the annuity will potentially be taxed under normal PAYE rules, depending on what you total income is.

HL's annuity rates are here: https://www.hl.co.uk/retirement/annuiti ... -buy-rates" onclick="window.open(this.href);return false;

Hawkey99 · Post by **Hawkey99** » 28 Sep 2020, 06:50

To give up 40k I would get £1507 with no annual increases ever or £767 with an RPI increase each year.

Talk about low returns......

If you said I could get 2% return on my 40k, I would take me approx 30 years to break even.....

Post by **RobertT** » 28 Sep 2020, 07:09

Yes annuity rates are crap and have been for many years, and represent very poor value for money.

Although when I first took an interest in these things 25 years ago, rates were roughly 3 times what they are now. A £100k pot would give a level/single life income of around £15k per year.

heapsy · Post by **heapsy** » 28 Sep 2020, 07:50

Hawkeye, there is another way. You could take any excess AVC and just use it like a short term annuity. Pay the tax and spread the money over a period of time. I'm seriously thinking about doing that with my AVCs. I'm reluctant to take the NRA65 pension early, but will have to see when the time comes. My AVCs would pay me about £70 per wk for 7 years until I reach 67. More if I spent it all by 65. Just a thought. The thing I concerned about with early payments is would I have enough money later as I get older. Cost of living etc? For some people the only cash they will have will be the lump sum payments from RM.