Want Annuity Certainty with Drawdown Flexibility? Here's How

[@chrisbourne-retirementplanner]

Thanks for watching guys. I have included a link to the quote site used in the description by the way for those interested in exploring this option for themselves.

[@jamesdoran1343]

Hi Chris, Any chance you could do a video explaining what you look for when choosing a VCT? Thanks and keep up the great work!

[@chrisbourne-retirementplanner]

@@jamesdoran1343 Hi James. This is a relatively straightforward one for me to answer here... I first consider the reputation and scale of the provider. I want to know how long the team has been managing VCTs, how much money is in that VCT and what successes and failures they've had in the past. Personally, I shy away from new VCTs offered by fledgling companies, because although they may be very good at what they do and the growth potential could be explosive, there's nothing to go on and it's a bit too much of a gamble. There are very few VCTs I ever advise my clients to consider for these reasons.

[@clivedyer17]

Convinced me. gone for a fixed term retirement plan with L&G today. Only for 3 years to bridge a gap till state pension, but a no brainer. Taking the TFLS and putting the whole whack in to this product. At the end of 3 years i get more back than i put in and get 12k per year! Beats the stress of watching investments fail. Hopefully the world is a better place in 3 years.

[@chrisbourne-retirementplanner]

Hi Clive. I’m really glad the info has been helpful. If it contributes to a more stress free life, then that’s got to be good!

[@clivedyer17]

@@chrisbourne-retirementplanner will i pay tax on the monthly income if under my personal tax allowance (12,570). The L&G system is super slick but if i pay an IFA will i get a better deal? Canada Life rates are better but their service has bad reviews.

[@davidflinders291]

I went to the L & G Calculator but wasn’t being offered any thing with lump sum returned,am I missing something………

[@kevinu.k.7042]

This is the best video I have seen on this subject - Very good. Thank you.

[@chrisbourne-retirementplanner]

Very kind of you Kevin - thank you. I’m glad it’s helpful.

[@ThornySubject]

This was very useful Chris, thank you. I'm currently about to access my pension pot that's actually looked after by L&G, and was at first considering just a lifetime annuity, and then found I could opt for flexi-access drawdown if I transferred to their Mastertrust scheme. I do also have the option of a fixed-term annuity as well though, and from what you say, it does look very appealing, so will definitely check it out. Regarding the RPI-linked lifetime annuity, I couldn't believe how many years it would take it to 'crossover' the 'level' version, and then about another 10 years to catch up the total income paid! It comes out as beyond my supposed life expectancy! 😅

[@chrisbourne-retirementplanner]

Yes it’s quite shocking - I can never square away the amount of time it would take to gain the money back! Thanks for watching - I’m glad it was helpful 👍🏼

[@clivedyer17]

Thanks Chris - This really is excellent content, some people pay and get less guidance! I have looked around and i will now target a 3 year plan with Canada life to get me to state pension age. It is about 5 months too soon at the moment so i will need to check rates again nearer the time.

[@chrisbourne-retirementplanner]

Sorry I missed this one Clive - thank you for your comments I'm really glad it's helpful!

[@jordankirkbride4612]

Cannot emphasise how much this is helping me! Please keep this up Thank You!!!!

[@chrisbourne-retirementplanner]

You’re welcome Jordan!

[@markfindlay8636]

Great info as always! The Jason Bourne of the financial world, without anyone getting prematurely retired 😊

[@chrisbourne-retirementplanner]

Haha thanks Mark. Tbh I got tired of all the travelling with the CIA so I swapped covert ops for pensions.

[@markfindlay8636]

@@chrisbourne-retirementplanner Safer dodging bullets than the tax man.

[@evilzzzability]

Awesome educational video, Chris. This will be new information for many people looking for retirement income options.

[@chrisbourne-retirementplanner]

Thank you! I do hope it’s helpful to lots of people.

[@jeancorley3952]

Excellent video. Thank you Chris. Going to look into taking this option asap

[@chrisbourne-retirementplanner]

Glad it’s helpful Jean.

[@david99m]

Thanks for that Chris. I never knew such a product existed. I've just retired and have a decent sized cash pot to get through and I'm putting my pension into a SIPP deposit account but this kind of product would be perfect for me after I get through my cash. If I can make inflation plus 1 or 2% in the medium / long term and at very low risk then I'd be happy with that and sleep a lot easier at night!

[@chrisbourne-retirementplanner]

Hi David. It’s really great to hear that this has highlighted another option to you! The most important thing is being able to sleep easy I’d say.

[@chrisbourne-retirementplanner]

I’ve included a link to the quote site I’ve used in the description by the way.

[@coling4991]

Really interesting video as always. Gives me a potential option to investigate vs going down the high yield dividend etf route I was looking at. Love your channel Chris, sooo useful 👌.

[@chrisbourne-retirementplanner]

Thanks Colin. So pleased it’s useful!

[@chrisbourne-retirementplanner]

I’ve included a link to the quote site I’ve used in the description by the way.

[@coling4991]

@@chrisbourne-retirementplanner Awesome, thanks 👍

[@krisjames999]

Great video. I’m just starting to give my pension more thought. Started it at 23 with only small monthly contributions and now I’m 38 and just started upping them. As it stands I’m single with no kids so if that’s still the case when I want to retire annuity looks a good option for me as nobody that I’d want to leave a substantial amount to. When’s a good age to start getting professional advice from someone like yourself, late 50’s?

[@chrisbourne-retirementplanner]

Hi Kris. We’ll certainly with regards pensions you won’t be able to access until age 57, so that may be when you need pension advice. However, it may be of benefit to take advice before then if you’ve built up sufficient assets to ensure that they are all held as tax efficiently as possible in preparation for withdrawal.

[@haggis58]

Thank you Chris. I never liked the idea of handing my pot over for a life time annuity, but this seems like a great option in a declining drawdown market.

[@chrisbourne-retirementplanner]

Cheers Alan. It certainly would be a more flexible half way house for many.

[@onemanrescue1]

Excellent video. Wasn't aware of this option. I had been looking at using part of my pot for a lifetime annuity and rest as drawdown but this looks a better option for me. Thanks

[@chrisbourne-retirementplanner]

That’s great to hear. It’s always good to know that a new option has been highlighted. I have included a link to the quote site used in the description.

[@Manc-fh5we]

Great video. I've been mulling over the idea of annuities recently. Coupled with the state pension together with a final salary with a previous employer both index linked. This could be just be what I'm looking for!

[@chrisbourne-retirementplanner]

Glad to hear it’s useful to you! Thanks for watching 👍🏼

[@Manc-fh5we]

@@chrisbourne-retirementplanner Just a quick update. I went to see PensionWise. They’re great if you want to compare annuity quotes. LV were extremely helpful too, telling me who’s quotes were higher than theirs and offering to help out if had any problems.

[@richguest]

Many thanks for this - much appreciated.

[@chrisbourne-retirementplanner]

You’re welcome Rich 👍🏼

[@jordankirkbride4612]

Hi Chris, maybe you could help with this too please. What’s the difference between an impaired annuity and enhanced???

[@chrisbourne-retirementplanner]

There isn’t really a difference - they’re interchangeable terms, both relating to increased income available as a result of lifestyle or medical factors. You may possibly see providers use ‘enhanced’ when the increase relates to negative lifestyle factors like smoking, and ‘impaired life’ when the increase relates to an existing medical condition that is likely to shorten your life expectancy, but really there is no difference.

[@chriscarey1879]

Nice thought, to be able to dip in and out when required. My thoughts were that annuities were dead.

[@chrisbourne-retirementplanner]

Hi Chris. Yes I think these innovations definitely make them more attractive, particularly with rates on the rise.

[@grahammills5707]

Thanks Chris for bringing this to our attention, it is very interesting - I need to go and play with some figures I think - great content as usual 👍

[@chrisbourne-retirementplanner]

Hi Graham. You’re welcome - glad it’s useful 👍🏼

[@brianwilkinson1715]

Great video. I too had no idea such products existed 👍🏻

[@chrisbourne-retirementplanner]

Thanks Brian. Glad it's helpful.

[@nickseccombe1357]

I have just read that moving from a SIPP to a QROPS pension if at or near the LTA means no 25pc charges to pay ever when over the LTA. UK still eligible but maybe not for long. I am amazed by this, could you perhaps do a video on the topic if familiar?

[@chrisbourne-retirementplanner]

Hi Nick. Yes you’re right and I have used QROPS before but it isn’t the land of milk and honey by any means and there are certain risks to be aware of. I think a video on this at some point would definitely be worth doing 👍🏼

[@nickseccombe1357]

@@chrisbourne-retirementplanner thanks Chris, that would be appreciated.

[@nickwright3413]

Cheers Chris this was very informative, so although I don't wish to retire from my current job until I am 60 could I place a private pension into this scheme next year when I'm 55 until I'm 60 and take it as an income with a lump sum of money at the end to reinvest?

[@chrisbourne-retirementplanner]

Hi Nick. You can place in at 55 but you can’t make contributions to this plan. You would also have to take your tax free lump at the start and reinvest that somewhere, so these plans are best used when income is required.

[@mattsennett]

Really good video Chris and that's something new to consider when the time is right. Like many I didn't realise that was an option and it certainly seems a good one for those in that boat right now 👍🏻

[@chrisbourne-retirementplanner]

Thank you Matt. Pleased to bring a new option to peoples’ attention!

[@andyfulton8120]

Another fantastic video from the Brad Pitt of financial advisors. Now this i really need to think about...thanks Chris!

[@chrisbourne-retirementplanner]

😂😂😂 Made my day Andy! Glad you enjoyed it 👍🏼

[@tancreddehauteville764]

Can someone tell me why information on annuities is so hard to find? There little that is freely available on the internet other than basic level annuity rates.

[@andyheywood8196]

Chris, so could all a fixed term annuity be purchased with all the funds of a pension pot (without taking any cash tax free), then later on maturity of the fixed term annuity 25% cash taken tax free?

[@chrisbourne-retirementplanner]

Hi Andy. No you would have to crystallise your pension pot (or a part of it) in order to go into fixed term annuity, so you would take your tax free lump sum at that point. Taking income from fixed term annuity would trigger your Money Purchase Annual Allowance.

[@tommytip123]

Excellent video Chris. I never knew such a product existed. Is the payout rate affected by age? eg taking out this product at 55.

[@chrisbourne-retirementplanner]

It is Neil. Like all annuities, the rate will improve with age. Health is not factored in though.

[@ianjames3078]

My plans are all over the place. May 2022 to March 2023 my deferred CETV has reduced by 38%! I was going to move that to SIPP ………I’m guessing no choice but to wait out the storm now. 🤷

[@chrisbourne-retirementplanner]

Hi Ian. While interest rates remain elevated, CETVs will remain suppressed. We may never see a return to the types of values offered previously.

[@timv5473]

Hi Chris, great video, certainly something to think about. May I ask, for the example quote from L&G you used, did you ask for monthly income paid in arrears? Also, if you took the guaranteed period option and the plan holder died before maturity of the plan, do you know whether the benefits are outside the plan holder's estate and treated in the same way as a SIPP?

[@chrisbourne-retirementplanner]

Hi Tim. Thank you! Yes, income paid monthly in arrears. Yes the death benefits would be treated in the same way as other pension death benefits.

[@Banthah]

Great video Chris, as always. I’m just working my way through your backlog 😊 I have a couple of questions on fixed term annuities, if you wouldn’t mind indulging me. For tax purposes, once the fixed term annuity is over, and you get a lump sum back, is that lump sum classed as crystallised? So after it matures, if I use that amount to go into drawdown, is the whole amount taxable, or does it revert to a normal drawdown where I get 25% tax free? Thanks

[@chrisbourne-retirementplanner]

It would all be crystallised funds - you would need to take 25% tax free lump sum when entering the annuity.

[@Banthah]

@@chrisbourne-retirementplanner Thank you

[@EvieBuxton87]

H Chris, I am currently thinking of taking a five year fixed term Annuity you are talking about here, but I am about 15% down on the pension funds I would be using to buy the annuity, would I be better of waiting for the values to come back or go for it now while annuity rate's are high

[@chrisbourne-retirementplanner]

Hi Derek. It’s a difficult question to answer, because we cannot be certain whether values will recover before interest rates change. I think there is turbulence ahead in the short term for stock markets but certain economic triggers, which we cannot be sure of yet, may either prolong this or see a recovery. Strangely, we will actually need to see some bad economic news, I.e a weakening of the labour market, to show that the economy is taking its medicine (the rate rises are starting to have the desired effect). This is all linked to the number of vacancies vs people available to take jobs and the resulting effect this has on wage inflation. If we see the unemployment rate rise, wage inflation will reduce, companies will stop having to increase prices of goods and services to pay for higher wage demands, inflation will start to dissipate, stock market will increase. These results are as yet unknown though, so I cannot give a definitive answer to your question. You can only base the decision on whether the income you are offered is sufficient to meet your objectives.

[@scotmorley8526]

Thank you excellent explanation

[@chrisbourne-retirementplanner]

You’re welcome Scott thanks for watching 👍🏼

[@MartinHopkinson]

Thanks for giving some very useful food for thought Chris. I’d resigned myself to the fact that nothing with a guarantee came close to the benefits of flexi-access drawdown but that looks very interesting. I’ve just gone through the quote with L & G and, obviously, it’s early days with much more advice needed but my immediate question is about the maturity value. The quote says “maturity value before tax”. Do you know what is the tax paid on the maturity value? Why should it be taxed if it’s return of capital?

[@chrisbourne-retirementplanner]

Hi Martin. It is taxable pension, just like all money in a drawdown pot… when you take money out of that pot you pay income tax on it. The action of transferring the value to another fixed income annuity, lifetime annuity or drawdown plan wouldn’t be taxable, but any income you take out afterwards would be.

[@MartinHopkinson]

@@chrisbourne-retirementplanner Thanks Chris. It made it appear that the maturity value sum was taxed before going back into a drawdown pot.

[@chrisbourne-retirementplanner]

Yes don’t worry, you only pay tax on pension income when it is actually taken out of the wrapper.

[@elephantandcastle838]

Yes, I had Pensionwise suggest the fixed annuity option last year as a bridge of certainty to cover the period upto getting my state pension in 7 years time! Since then though, the idea of creating a "bond ladder" for this period to give this certainty also appeals. This would give the additional benefit of changing tack to mitigate against taxation changes, albeit a more complicated/hands on approach. Any thoughts?

[@chrisbourne-retirementplanner]

Hi there. There are some excellent opportunities in bonds. The above could work well. It's just like you say - a little more hands on and without the absolute safety net of an annuity guarantee. Generally, better results will potentially be gained from taking greater risks. The tricky thing in life though is being able to determine which risks to take, and which ones to remove.

[@richardwhite1120]

Oh for a crystal ball, it would make things so much easier! 😊 Excellent content, very helpful. Best wishes.

[@R8135003]

What coloured jacket do I need to buy???

[@chrisbourne-retirementplanner]

😆 Go for a beige linen blazer and you’ll definitely feel like a retiree.

[@roberthudson4548]

Hi Chris - I am 62 and recently retired, I was very interested in a 5 year fixed term based on your example of getting a full return on my £200,000 pot as this will help bridge the gap between now and state pension at 67. However I could not get anywhere near the 5.2% returns stated in your example. I realise this video is 12 months old but have the returns dropped so significantly?

[@chrisbourne-retirementplanner]

Hi Robert. I think the rates are now a fair bit lower on the flexible plans. The market is pricing in lower interest rates, which will reduce what these plans are able to offer. This video was actually published in October 2022, so it’s nearly two years old. Pricing is quite different now compared to then.

[@rogerandout808]

Great video ... is this a new style of annuity created as a reaction to the pension freedom rules or have they been around for quite a while?

[@chrisbourne-retirementplanner]

They’ve been around a long time Roger but like most other annuities, the rates haven’t been particularly attractive until recently.

[@ajsvet3073]

Informative as ever. Can you purchase an annuity with a combination of pension funds and cash say from an isa

[@chrisbourne-retirementplanner]

Unfortunately the plan shown is for pension funds only. There are providers of purchased life annuities, which is what annuities bought with non-pension funds are called. I believe Canada Life is one of them.

[@martinpage253]

@@chrisbourne-retirementplanner I assume AVC's qualify for these fixed term annuities?

[@chrisbourne-retirementplanner]

Yes they would Martin.

[@simonellis7775]

Ok but what annuity would the guatantee value buy in 5 or 10 years time? Also so what if an rpi income pays a lot less now why not take a level income and have some to put away each month. Just be careful advisers ate still worried about giving up the funds and an fixed term is another way of them getting a second bite of cherry. Mmm

[@ciaoatutti11111111]

Hi there... I am sure I am missing the trick there. I got a pension, that is my work pension that I top every month. Now... Can I open a second pension if I do not have any other precious job contributes?

[@chrisbourne-retirementplanner]

Yes you can open as many pensions as you like as long as you don’t exceed your annual contribution allowance. Quite often an employer will match further contributions though so it’s best to maximise what’s on offer there. You can still purchase these annuities with funds built up in your employer sponsored money purchase scheme. However, if there are no additional contributions on offer from your employer and you want to build up a separate pot elsewhere, it’s definitely possible to do so.

[@justin.trading]

Using some of my pot to buy an annuity now, ahead of time, to lock in a fixed guaranteed income for life to pay out from 55 (I am 52) would be perfect, do you think these rates will last another 3 years?

[@chrisbourne-retirementplanner]

Hi Justin. It’s hard to say. Rates will move up a bit from where they are now over the next 6 months for sure, but the longer term direction of interest rates can never be predicted. My feeling is that they won’t be going down to the super low levels we’ve seen over the past decade for a while again though.

[@leesmith9299]

mmm. seems like these could really give you shelter from the storm of volatile markets.

[@chrisbourne-retirementplanner]

Yes they would do that Lee. Quite a comfort to many people no doubt.

[@leesmith9299]

@@chrisbourne-retirementplanner good to have some certainty when you're knockin' on heavens door. especially when masters of war are creating havoc. easy to panic but it aint me babe. i don't think twice, its allright.

[@tobybarker6808]

do you pay tax on the lump sum at the end? presumably yes, or this seems too good to be true

[@tobybarker6808]

answered my own question.....yes you do

[@chrisbourne-retirementplanner]

Hi Toby… yes, if you were to take the lump sum out as a cash lump sum, not if you were to transfer it into a new plan at the end… You would simply continue to pay tax on regular withdrawals.

[@TheSimArchitect]

This sounds good but they require you to be at least 55 years old to start getting paid. I wish we could get that when we retire early to gap the time between now and when goverment pension kicks in when we're 69 years old or so. That would be handy to give peace of mind against unemployment risk so we know we can afford at least rent, utilities and food. Any product that does that? Bonds are only paying well for short term, can't get a guaranteed 25 year rate of 5% (even the American CDs are paying 4.7% and foreigners from EU have a lot of unrecoverable income tax withheld in US so we can't earn that income tax free, therefore we get less than 3%). I also wonder if the lump sum we give to the insurance company / bank is insured by the government if they run out of money (otherwise, if we're taking risk, they can just go bankrupt if interest rates are lower and insufficient to sustain those income levels or if they mess up) and if it leaves our personal assets balance, as we forfeit access to it for the duration of the plan. The latter would be VERY helpful for frugal savers on low incomes that might regain access to benefits like rent subsidies and other benefits that are cut off when you "saved too much" even if you survive on very low incomes (or are unemployed) that are much lower than the income limits for those (the governments wants people to spend, so annuities could be a handy loophole to the "you should use your own money before getting help" policy). Thanks for the content!

[@chrisbourne-retirementplanner]

Thanks for your comment! Annuity pots are protected by the FSCS. Annuities are classed as long-term insurance contracts and the FSCS should cover 100% of the claim with no upper limit.

[@andrewrae5005]

Would this income be taxable from the annuity if running along side a works pension of 20k per annum?

[@chrisbourne-retirementplanner]

Hi Andrew. Yes it would - you would generally take 25% tax free lump sum first and purchase the annuity with the remaining pot, which is taxable as income.

[@andrewrae5005]

@@chrisbourne-retirementplanner thanks for clarifying

[@KenSchaard]

Are these Fixed Term Retirement Plans available in the USA?

[@chrisbourne-retirementplanner]

I’m not sure about that I’m afraid Ken.

[@jonathankeeley9550]

So you can put pension money into an annuity for a fixed period then return it to your pension at the end of the fixed period?

[@chrisbourne-retirementplanner]

That’s correct Jonathan.

[@jonathankeeley9550]

@@chrisbourne-retirementplanner thanks definitely worth investigating

[@chrisbourne-retirementplanner]

There is a link to the quote site used in the description if that’s helpful.

[@nopenope9200]

just seen this now and your rates from 2022 are nothing compared to now which is bizarre bearing in mind interest rates have increased so significantly. Now for a 10 year fixed annuity with the lump sum returning I get a 1% return per year on 600,000. So this fixed term annuity is an absolute joke. 1% return? with no inflation protection on the lump sum - come on, pull the other one