Should I Take An Annuity Now?

Posted on: 24 November 2008 by Gareth Hargreaves

50connect reader Olive asks expert Peter McGahan whether she should draw her pension now.

I am a 64 year old woman who is self employed and not planning to retire for a few years.

I am still paying into a small pension with Friends Provident Stewardship fund. The value of the fund at December 2007 was £40629.66.

I understand that in the present financial climate I should take an annuity as soon as possible. I feel that I need advice about this as I do not really understand all the information about annuities that I read on the internet especially as my fund is so small.

I also have a small teachers pension of which I received a lump sum at 60 and monthly payments.

I am not sure why you believe you should take an annuity as soon as possible. If you take an annuity you are effectively taking yourself out of the market when it is depressed which is pretty much what you shouldn’t do.

Much depends on your attitude to risk but the ride will still be a bumpy one from here.

Normally when you are coming close to your retirement date you would begin taking your investments out of equities and into safer investments such as cash and fixed interests but you have not been able to do that it would appear.

I would recommend you discuss your attitude to risk with an Independent Financial Adviser and decide whether or not you want to remain invested.

Beyond that you have the option to leave your cash invested until age 75 and allow the market to bring some support to the falling values.

If you are considering an annuity now, look for an open market option that allows you to transfer your pension to another provider to avail of the best annuity rates in the market.

Drawdown and phased drawdown also allow you to take a smaller income from your fund as well as tax free cash now but the size of your fund is prohibitive.

Taking an annuity during the credit crunch may not be wise. There are other options but these are limited for anyone with a small pension fund.

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