Fixed-term annuity at 50. Can it be done?

[MySaxIsOnFire]

Rates are decent at the moment, so a 10-15 year fixed term annuity looks as if it could be a good bridge to pension age. But the info I've found so far only talks about buying an annuity with your pension pot, and therefore at a minimum age of 55.

For fixed term rather than lifetime, it shouldn't matter to the calculations what age I am. So is it possible - can you get one earlier (with money held outside a pension)?

Age does still matter if the terms of the plan mean it stops paying out on death. It matters less where guarantees have been included (at extra cost) to ensure the annuity payments continue in full to the end of the fixed term regardless. So yes, minimum age currently is 55.

Annuity payments are taxed as income so it doesn't make sense to use money that's outside a pension to buy one. Some sort of income bonds or investment bonds might be more appropriate, perhaps.

Good point about risk of death of payment stops at that point - that could mean some increase in price, but shouldn't rule it out as an option.

So yes, minimum age currently is 55.

By law, like pension withdrawal? Because no providers offer them at an earlier age? Or can you get them but the numbers mean it's uneconomic.

Annuity payments are taxed as income

Only if your income is above the tax threshold. Would doing similar via investment bonds or income bonds be tax free, or would that be subject to income/dividend/interest tax? (Dividend and interest tax both, I think, having lower thresholds than income tax.)

You can buy a deferred annuity but need a specialist IFA in order to do it.

An alternative would be a bond ladder, holding each one till maturity, maturing every year or whatever.
Held in a Sipp you couldn’t touch it till 55 though.

Yes, which is why the whole point is to do this entirely separately from a SIPP. And bond ladders are easy enough for 5 years but tricky for 10-15. Doable, probably, but to get a better return than current annuity rates steadily over that term would take a fair bit of work.

Deferred annuity wouldn't help. I don't want to defer it - I want it now (not now-now, but starting sooner than a DA would.)

Purchased life annuity seems to be what I'm looking for - no age barrier on those.

@MySaxIsOnFire hi OP. 2 years ago you started this thread, so I'm not sure if you're still active on MN but hoping so! Did you manage to find anywhere to buy an annuity in advance of retirement in the end? I've been googling the exact same questions as you but getting no where. I've only come across one other person than you&me on the entire Internet trying to find the same answers but I can't believe there aren't more people out there in this position - wanting some guaranteed return better than just investing in a bank account. I'm several years away from being able to access my pension pot, and am perfectly happy to just use taxed savings for this purpose (as I expect the annual return I'd be able to afford would be below or very close to my tax free allowance anyway). Did you find anything? Canada life seems to he the only place that mentions PLAs online. AI is hopeless and just keeps taking about normal retirement annuities. It's so frustrating!

Hi Smidge. I gave up in the end and am just risking the markets.

It's something you'd think there would be a demand for. And even if only a limited number of providers offer it - in fact especially if that's the case - it's in their interest to get the infor out there. So it's baffling that they make it so difficult to find anything out.

I have been looking into purchased life annuities and found one resource which gives a bit more information - sharingpensions.co.uk. However I think there are very few actual providers.

Agreed! Thanks for getting back to me. Disappointing though, another dead end. I just can't see the issue, they'd just have to price them accordingly, surely.

Purchased Life Annuities were popular in the 90s as interest rates and bond yields were higher. There is currently a window of better value to purchase an annuity but they rarely offer value for money.

Note you only pay tax on the interest element of the payment as the majority is viewed as return of capital and therefore tax-free.

I was also looking for an annuity pre age 55 (age 52). Even more annoyingly I just get hit by days with the age increase to 57!

@Smidge001 - have you investigated utilising low-dividend, discounted UK government gilts? Building a successive bond ladder over the requisite number of years would ensure that each year another set of bonds would mature for income. Gilts dividends (the coupon) are taxed as income, but the gain on bond maturity is exempt from Capital Gains tax. An added advantage is you can calculate exactly how much you will receive in dividends and on maturity so establish certainty of your gains at a fixed rate.

www.moneysavingexpert.com/savings/uk-gilts-lower-tax-savings/

You’re too young. Annuity providers are taking a risk on you dying younger than your peers. No money to be made if you’re likely to live to term so no annuities available.

At one point there was only one provider still offering them but we may be back to two now.

It previously made sense where someone was using all their pension including tax-free cash to buy two different annuities so you wouldn’t end up paying tax on your tax-free cash.

When I did the reasearch recently still taking the better tax position into account, the difference in rates was such that it did not make sense to go for the two separate options.

My hunch is you might as well leave it in a bank account with decent interest and draw down on it if you don’t want to invest.