The Lemon Fool

I am about to crystallise my SIPP, so for completeness I asked Hargreaves Lansdown for a quote on an joint life indexed linked annuity. For my wife and I, both 55, non-smokers, moderate drinkers with no weight or health issues that came out as 1.77%. I thought it would be bad, but not that bad. Thank goodness for Osborne's pension freedoms. I was advised to get a health check as things like high cholesteral can improve the rate. Maybe I should go on a cream cake, bacon and cheese diet for a few weeks before the blood tests?

If I wanted a joint life flat rate policy instead, that would push the rate up to 3.76%. I have not worked it out, but I reckon a simple 50 year gilt ladder would probably be better value. Always the risk though I might make it passed 105!

ps. For those considering transferring an index linked DB pension to a SIPP, the rate I was quoted is equivalent to a commutation rate of 56.

Meanwhile final salary pensions are valued on a multiple of 20 - a national scandal that rips off those that fund them !!!

My wife (Age 56) has two small deferred index-linked DB pensions (as well as several small DC pots). She was given a transfer value for the two DB pensions of approx £12K for each one about four years ago - could be worth doing a transfer to a SIPP or a single DC pensions now ?

TimR

.

thebarns wrote:Meanwhile final salary pensions are valued on a multiple of 20 -

Only for tax purposes. Would senior civil servants really want the lifetime limit applied with benefit multipliers of 50 or more?

The risk/reward relationship has become distorted. UK Government Indexed Bonds offer an income of around 1/8th to 1/4 of a percent, whilst preserving the capital as measured by the RPI. On the face of it, you can obviously do much better than this with equity investment but with a volatility risk both on the income and capital values.