As it is my money why do I, under UK law, have to buy an annuity with my pension fund in the end?

Question

Annuities take your money for keeps and pay you no more than about 1% above a bank deposit a/c.
- Why should I have to make a compulsory gift to an issurance company?
- Why can I not manage my money myself, if I want to?
- Do you know the magnitude of the annual bonuses in the financial industry? They are obscene

Old know all, you arerepeating the platitudes spouted by the government. It gives me 28% tax relief and then requires me to give that plus my own money to an INSURANCE co., not to the nation. Your last para confuses the huge annual Xmas bonuses the financial industry gives out to ALL senior staff, with the commission paid to its small salesmen who deserve it.

Gem, your scheme will not save you from having to gift 75% of your entire fund to the insurace at cats.

Steve B, Thanks for explaining the Plymouth Brethren loop hole. But even that confiscates you money in the end.

John, I agree with you. UK tax laws fleece the ordinary people, but allow private equity billionaires and their ilk, to pay as little as they like.

Answer 1

Pension arrangements have special tax breaks. You get tax relief on the contributions and the fund is tax sheltered. The rules are designed to make you take the proceeds as an income and not just use the plan as a tax dodge.

By law, insurance companies have to invest annuity funds in Government securities. You get the return on gilts adjusted to take account of your life expectancy. When he was Chancellor, Gordon Brown decided to stop issuing new gilts but insurance companies still have to buy them. With more and more people after a limited supply of gilts, prices are sky high so yields are pathetic. Add to that the fact that people are living longer, and you can see why annuity rates are so poor.

As for bonuses, these are paid to the sales staff. People who flog life assurance have always been grossly overpaid. It's because people are not interested in financial advice and have to be bullied, charmed and threatened into buying the merchandise.

Answer 2

If thats the way you feel - why put your money into a pension??
Why not put it into a Bank Account??
I've just started my own PPP and I actually wish I'd started earlier so I would have a bigger fund when I come to purchase my Annuity.

Old Know all - you obviously don't know it all. I work for an IFA and you are lucky if you get paid commission on a Personal Pension these days - also Life Assurance pays rubbish too. Its Bonds that can pay a lot of money, but really only if you have the clientelle with a lot of money to invest.

Answer 3

The answers so far assume you have a large pension pot or are paying tax at the highest rate. For the ordinary person, tax is only delayed and 'draw down' is too expensive. Other countries have a better system. Once you have a pension income sufficient to guarantee you will never call on the State to bail you out, you are allowed to manage the rest of your pension pot by yourself. Of course other countries are not in the thrall of a Scottish control freak like Gordon Brown and a Treasury that hates the thought of ordinary people being free.

Answer 4

You can manage it yourself = it's called a Self Invested Pension Plan (SIPP) & by law, your existing pesnion provider must allow you to move your fund into one if you want to (plainly you won't do that whilst your Employer is contributing into the pot)

You do not have to buy an Annuity untill you reach 75, ..if your current pension provider says otherwise, when you reach retirement age, take the 'open market option' to move your pension fund into a SIPP.

You take the usual 25% Tax Free lump sum from the SIPP and continue to manage the rest of your pension 'pot' whilst drawing an income (Pension).

Before you reach 75 you need to 'covert' to the Plymouth Breathern - then you don't have to buy an Annuity at all = instead you move into 'ASP' drawdown and continue to manage the fund.

However when you die, the Inland Revenue will finally get it's hands on whatever is left of your pension 'pot' (or at least 70% of it) .....

NB. I have an aquaintance in the Inland Revenue .. he tells me that, when it comes to it,

"The secret is to STOP thinking it's your money"

Answer 5

considering the fact it fairly is the guideline of pension schemes. you ought to purchase an annuity with the completed fee of your pension (after any lump sum you could decide directly to obtain) to get a pension for something of your life. Pension schemes (different than for the state scheme) are actually not obligatory. in case you do no longer desire to make a contribution to a scheme, then purely save money on your retirement in a economic business enterprise account, yet except you improve into great wealthy, it won't improve into adequate to offer you a month-to-month top rate for all times. i think of you're being somewhat short sighted approximately this via fact the prospect to pay right into a pension scheme is broadly considered a benefit interior the long-term. i do no longer understand your age yet you could supply on your economic destiny now because it is going to come earlier you think of. suitable desires.

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