Why I’m Happy I Bought an Annuity in April 2014

Written by Karen Bryan

targetI’m so glad that I made the decision to buy an annuity, an income for life, from my pension pot at the earlier possible date, when I hit my 55th birthday.

This is because annuity rates have fallen so much since April 2014. I recently got a quote for an inflation linked annuity with a five-year guarantee based on the size of my pension pot in early 2014. The initial payment quoted was more than 20% less than the quote I accepted in April 2014, two years and five months ago.

This means not only is my pension income higher, I have also been receiving payments since April 2014. Receiving a guaranteed regular income has reduced the pressure on my to generate income from my websites.

I acknowledge that you need a crystal ball to judge the best time to use your pension pot to buy an annuity. If I die within the next twenty or so years, then buying an annuity will have been a poor decision, as once you buy an annuity you have handed over your pension pot to the insurance company providing the annuity.

I think that a lot of people aged 55+ will be tempted to go for the income drawdown option with the new pension freedoms. This means that your leave your pension pot invested and take income from it. If your investment strategy is successful and your pension pot grows, you could have a larger annual income. Plus if you die, you can pass on your pension to your family.

I didn’t want to go down that route. I wanted to have an inflation proofed guaranteed income for life. I didn’t fancy potentially having to manage my pension pot and decide upon sustainable annual withdrawals for decades.